Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

ABERFAN DISASTER

Mr. Speaker: I have received the following telegram from the President of the Belgian House of Representatives:
The terrible tragedy at Aberfan, which has brought death to so many young and innocent victims, profoundly moves the people of Belgium, whose friendship for the United Kingdom has made them feel even more the extent of the great disaster which has struck Britain, and in particular Wales. In the name of the House of Representatives, I send my deep condolences to the House of Commons and express to the families of the victims our profound and sorrowful sympathy. (Signed) A. van Acker, President of the House of Representatives.
The House will wish me to convey to the President our deep appreciation of this kind message of sympathy, which I shall place in the Library.

PRIVATE BUSINESS

LONDON BRIDGE BILL

[Queen's Consent, on behalf of the Crown, signified]

Bill read the Third time and passed.

EAST KILBRIDE BURGH BILL (By Order)

Second Reading deferred till Thursday.

Mr. Edward M. Taylor: On a point of order. Would it not be in order for this Bill to be discussed in the time which the Leader of the House has set aside for opposed Private Business on Monday next at 7 p.m.?

Mr. Speaker: That is not a point of order for me. It is a point which the hon. Gentleman must raise with the Leader of the House.

Oral Answers to Questions — NATIONAL FINANCE

Decimal Currency

Mr. G. Campbell: asked the Chancellor of the Exchequer why he rejected the recommendation of the Consumer Council on units of decimal currency on the grounds that the proposed smallest unit would be too small for future use.

The Chancellor of the Exchequer (Mr. James Callaghan): The Government rejected the 10s.-cent system, not for the reason the hon. Member suggests, but because they agree with the majority of the Halsbury Committee that the £-cent-½ system has greater advantages. The value of the smallest coinage units is the same in both systems.

Mr. Campbell: Does the Chancellor of the Exchequer realise that it was reported in the Press at the time that he has rejected this recommendation for the reason given in the Question? Will he make his present view absolutely clear?

Mr. Callaghan: I am obliged to the hon. Gentleman. In fact, I have written to the Consumer Council, which originally raised this matter with me, telling the Council what I have now repeated in this Answer.

Inland Revenue (New Office Building)

Mr. Boyd-Carpenter: asked the Chancellor of the Exchequer why, in view of the Government's policy of restricting office building in the London area, accommodation for the Inland Revenue is being furnished in a new office building, New Maiden House, in the Royal Borough of Kingston-upon-Thames; what steps were taken to provide accommodation for the Inspectors of Foreign Dividends and the training school for inspectors of taxes outside the Greater London area; and what rent is being paid in respect of the provision of accommodation for the Inland Revenue in this building.

The Chief Secretary to the Treasury (Mr. John Diamond): Because the staff in question could not be moved outside


the London area, and the new office building was not affected by the office control. It is not customary to disclose the rent paid for Government offices.

Mr. Boyd-Carpenter: Can the right hon. Gentleman reconcile that Answer with the information given to me by the Financial Secretary that one section of the staff—the Foreign Dividends people—have been brought into the London area from Hinchley Wood? Is it not absurd and unfair to install the Inland Revenue in offices in the London area when the borough council concerned is forbidden by the Board of Trade to consolidate its own offices to discharge its increased responsibilities?

Mr. Diamond: As the right hon. Gentleman appreciates, any Questions relating to the Board of Trade should be addressed to my right hon. Friend the President of the Board of Trade. As regards the earlier part of the right hon. Gentleman's supplementary question, he will recollect that the office of the Inspector of Foreign Dividends is part of the Surtax Office and, therefore, is incorporated within it.

Economic Measures

Mr. Marten: asked the Chancellor of the Exchequer if he will make a statement on the effectiveness of the measures announced on 20th July.

Mr. Stratton Mills: asked the Chancellor of the Exchequer what estimate he has made of the likely balance of payments outcome for 1966; and if he will make a statement.

Mr. Callaghan: The balance of trade is improving. The drain on the sterling reserves has stopped. In the domestic economy there is an easing in the pressure on resources and on costs. The evidence so far available therefore is that the Government's measures are having the desired impact.

Mr. Marten: What is the Chancellor's latest estimate for the restoration of the balance of payments? Would that include the servicing of our overseas debts but presumably not the capital repayment? What long-term plans has he for steadying up the growth in the rate of local government expenditure?

Mr. Callaghan: I see no reason to alter the forecasts made after the July measures, namely, about moving into surplus in 1967. That would include servicing the debt but not repayment of the capital or repayment to the International Monetary Fund, which I would expect to be borne on the reserves. As to the question about local authority expenditure, the Estimates season is coming round and an approach will be made to local authorities in due course about their spending.

Mr. Mills: Can the Chancellor of the Exchequer be a little more specific in his estimate for 1967? What progress has been made with the £100 million reduction in the level of Government overseas expenditure foreshadowed in the measures of 20th July?

Mr. Callaghan: I cannot be more specific on the first part. The second part is a separate question.

Sir G. Nabarro: Does not the Chancellor of the Exchequer agree that the effects so far have included destroying investment in the private sector of industry, which has dropped calamitously in the last few months? What steps does the right hon. Gentleman propose to take to restore investment in the private sector?

Mr. Callaghan: I do not think it is true that private investment has dropped calamitously. I think that what caused the hon. Gentleman to use that phrase is a forecast of what investment will be in 1967, which is a different matter.

Mr. Higgins: What is the maximum level of unemployment that the Chancellor now expects in the coming winter?

Mr. Callaghan: I have no reason to alter any forecasts that have been made so far.

Dividends

Mr. Winnick: asked the Chancellor of the Exchequer how many companies have issued increased dividends during the wages and incomes standstill.

Mr. Dickens: asked the Chancellor of the Exchequer how many public companies have paid higher dividends since 20th July, 1966; and what action he proposes to take.

Mr. Callaghan: I would refer my hon. Friends to the reply given to my hon. Friend the Member for West Ham, North (Mr. Arthur Lewis) on 20th October.

Mr. Winnick: Is my right hon. Friend aware that there is a very strong feeling in the country that the standstill is not being applied as strictly to dividend increases as to wages and salaries and, if this is so, is it not deplorable?

Mr. Callaghan: I am not aware of that feeling. If it is the case, I hope that my hon. Friend will help to dispel it by pointing out that, of the 628 companies that have declared dividends, 616 are within the standstill policy.

Mr. Dickens: Notwithsanding that reply, does my right hon. Friend accept that between 20th July and 19th October some 78 public companies announced increased dividends? Will he set out in the OFFICIAL REPORT a list of the categories of exemptions he has allowed under the dividend standstill, itemising against each category the number of companies which have received exemption?

Mr. Callaghan: I am not aware of the figures which my hon. Friend quotes. When he sent me a list before, I found that it was not altogether complete in a number of respects, but I am satisfied that the great majority of companies are conforming to the policy. It does not help the prices and incomes policy to pretend otherwise. All the evidence that I am examining shows that a great many public companies are doing their best and following the advice and request of the Treasury to make their policy conform.

Mr. Biffen: Can the Chancellor confirm that even under Part IV of the Prices and Incomes Act he has no legal authority to require a standstill on dividends?

Mr. Callaghan: Yes, Sir. It is the Government's view on this, as on other matters, that if voluntary co-operation can be secured it is the best way of achieving all these ends.

Mr. Crawshaw: Does my right hon. Friend realise that his policies would commend themselves more to hon. Members on this side of the House if it

did not appear that some people are more equal than others? Could my right hon. Friend say that despite the figures he has given, the Government can take measures to ensure that these amounts of money are not given out in the future under the guise of bonus shares or by any other means?

Mr. Callaghan: I believe very strongly from what I have seen that the present pressure on profits and on the return on capital necessary to ensure that there is modernisation of plant and investment is not excessive and is' not likely to be excessive during the next 12 months.

Mr. Dickens: asked the Chancellor of the Exchequer what steps he is taking to ensure that private companies adhere to the incomes standstill in respect of distributions to shareholders.

Mr. Callaghan: The appeal for a voluntary standstill is addressed to all companies, but most private companies will be close companies and their dividends will have to take into account also the requirements of the tax rules.

Mr. Dickens: Is my right hon. Friend aware that there are about 16,000 public companies in this country and some 523,000 private companies? Will he set out for the House the arrangements he has made in the Treasury to exercise some supervision over this very large sector of industry? Can he tell us how many of the 523,000 private companies are close companies?

Mr. Callaghan: No, Sir. As I have already explained to my hon. Friend on other occasions, a close company is not a permanent position. It varies from year to year and, therefore, no central list can be drawn up. As to the proportion between public and private companies, it is true that public companies represent only 2 per cent. of the total, but they account for the overwhelming proportion of the total profits.

Sir C. Osborne: If in close companies like this the Chancellor requests that dividends shall be restricted, will he still allow the Inland Revenue to direct for Surtax purposes?

Mr. Callaghan: Yes, Sir, because that is the law, and it would be a means of tax avoidance if it were set aside. I


should like some of my hon. Friends to understand that.

Mr. Costain: Does the Chancellor agree, and will he explain to his hon. Friends, that the object of getting the close companies to pay dividends is to enable him to collect Surtax? Would he not agree that, if these companies did not make profits, Income Tax for the rest of the population would have to rise?

Mr. Callaghan: The proper policy is that companies should make a fair return on capital which would enable them both to accumulate savings to modernise their plant and machinery and to give a reasonable return on what is employed. It is foolish to try to equate return on capital in this way with some other items in the economy.

Mr. William Hamilton: asked the Chancellor of the Exchequer what steps he has in mind to discourage or prevent any dividends now frozen by current policies from being paid in full immediately following the freeze.

Mr. Callaghan: There are fiscal powers and other means to prevent an excessive growth in dividends.

Mr. Hamilton: Does my right hon. Friend recognise the extreme vagueness of that Answer? Does not he recognise that a dividend payment frozen now is simply a payment deferred, whereas a wage frozen now is a wage lost for ever? It is this kind of vagueness which makes it difficult for far too many people to accept the justice of the Government's claim that the prices and incomes policy is just.

Mr. Callaghan: I do not know whether my hon. Friend was present when we had an earlier exchange on these matters.

Mr. Hamilton: I was.

Mr. Callaghan: In which case, my hon. Friend will have heard me say that there is a substantial pressure on costs now which will have a substantial reflection in profitability over the next 12 months. I do not believe that we are going to be concerned with a problem of an excessive return on dividends. We are going to be concerned with other problems apart from that.

Mr. McMaster: Is the Chancellor aware that the only way to increase investment is to increase savings, that entirely different considerations apply to saving and investment than to wages, and that the best way of increasing savings would be to allow dividends to rise?

Mr. Callaghan: I am all in favour of higher savings, both personal and in a corporate capacity. That is one reason why Corporation Tax has been fixed at the low rate of 40 per cent., whereas, of course, if profits are distributed in the form of dividends there is a higher rate of tax. That is also why I introduced the new National Savings Certificates, which are achieving very good results.

Mr. Molloy: Will my right hon. Friend acknowledge that, if there is a sudden upsurge of dividend releases during the severe restraint period—[HON. MEMBERS: "Oh."] This is important, and I know that hon. Members opposite consider it to be as well—all the appeals to wage earners to continue restraint will be totally ignored, with justification?

Mr. Callaghan: I accept that. That is why dividends were included in the White Paper on Prices. Incomes and Dividends. But what I am trying to point out is that this is not a genuine problem with which we are confronted at the present time. It is far more important that we should concentrate on problems which exist than problems which do not.

London Airport (Bar Prices)

Mr. Dance: asked the Chancellor of the Exchequer why bars situated be yond the Customs barrier at London Air port are obliged to charge duty on the individual drinks which they sell, whereas travellers are able to buy spirits by the bottle duty-free.

Mr. Diamond: Because drinks bought at the bars are consumed in this country, whereas bottles bought from the duty-free shops are exported for consumption abroad.

British Troops, Germany (Costs)

Mr. Bruce-Gardyne: asked the Chancellor of the Exchequer when he will conclude negotiations with the Federal German Government regarding the foreign exchange cost of British troops in


Germany; and whether it is still his policy to ensure relief from the whole of this cost.

Mr. Dalyell: asked the Chancellor of the Exchequer if he will make a statement on his talks with the German Government on 13th–14th October on the financial arrangements for the British Army of the Rhine after March 1967.

Mr. Callaghan: It remains the Government's policy that these costs should by one means or another be covered in full. It is my hope that the tripartite talks proposed by the U.S. Government will lead to a satisfactory outcome at an early date.

Mr. Bruce-Gardyne: Does the Chancellor recall that, in his Budget Statement in May, he said that he intended to achieve agreement on this by the autumn? Can we take it that the autumn will run a little late this year?

Mr. Callaghan: Yes, Sir. I think we can.

Mr. Barnett: Could my right hon. Friend tell us how much has been utilised against the offset arrangements already in existence for the two years to March 1966?

Mr. Callaghan: I should be glad if my hon. Friend would put that Question down. I have a figure in my mind, but I prefer not to quote it at the moment.

Mr. Frank Allaun: Will my right hon. Friend tell the Bonn Government that, if they are prepared to cover only half the costs, we shall reduce our military expenditure in Germany equally by half?

Mr. Callaghan: That position has been made clear, not in relation to the percentages, but to the necessity for getting full cover for the troops in Germany.

Investments (Capital Losses)

Mr. Bruce-Gardyne: asked the Chancellor of the Exchequer if he will give instructions to the Inland Revenue to relieve the taxpayer from the obligation of calculating the historical cost of investments in cases where he is claiming a capital loss on the sale of such investments.

Mr. Diamond: The Revenue does not insist on a precise calculation of the cost

of investments acquired before 6th April, 1965, where it clearly exceeded the value on that date.

Mr. Bruce-Gardyne: Can the Chief Secretary confirm that, where a taxpayer claims an allowable loss, the onus is on the Inland Revenue to say that he is not entitled to it because of the historical cost of the shares?

Mr. Diamond: I could not reply in precisely those terms. Where the gain can be shown to be less in the period from Budget day than from the date of original acquisition, the gain is limited. Similarly, where the loss is greater, the loss is limited. It is only in those cases where the taxpayer wishes to establish the historical cost that the question arises.

Government Contracts (Racial Discrimination Clause)

Mr. Winnick: asked the Chancellor of the Exchequer what progress has been made in getting a clause inserted in all Government contracts that no forms of colour and race discrimination shall exist.

Mr. Callaghan: The Government are consulting the Trades Union Congress and the Confederation of British Industry on ways of using Government purchasing to discourage racial discrimination in employment.

Mr. Winnick: Would my right hon. Friend be a little more explicit? Is it the Government's intention to put a clause into all Government contracts, and, if so, is there any chance that such a clause will be finalised by the end of the year?

Mr. Callaghan: The purpose of the consultations is to decide the best way of achieving this principle. Therefore, I cannot give an answer at the moment to the first part of my hon. Friend's question.

Mr. Iain Macleod: Could the Chancellor tell us, on this important matter, whether it is legal difficulty—that is, basically the question of definition—that is holding this up, or whether anybody is raising objections on the principle of what it seeks to do?

Mr. Callaghan: I do not think it is legal difficulties or objections in principle. The matter has gone to the T.U.C. and C.B.I., who are turning their attention to


what is the best way of achieving the principle, and I do not think that the legal difficulties concern them at the moment.

Tax Returns (Accountants' Fees)

Mr. Dodds-Parker: asked the Chancellor of the Exchequer whether he will allow fees paid by taxpayers to recognised accountants for completing tax returns to be deducted from gross tax liability, in view of the increased complexity of the returns.

Mr. Diamond: No, Sir.

Mr. Dodds-Parker: Will the Chief Secretary re-examine this? Surely it is in the interests of the Exchequer to get tax returns filled in promptly and accurately? Would it not gain more than it would lose by accepting this?

Mr. Diamond: We are following the normal rule, whereby accountancy charges for valuations in arriving at the amount of the capital gain are deductible but charges for completing the income tax return are not allowed.

Mr. Frederic Harris: Do not a large number of taxpayers pay millions of £s a year in excess tax which they should not have to pay? Surely it is only right and proper that the Government should permit this allowance?

Mr. Diamond: It has long been the practice for taxpayers to have freedom to get advice if they require it. Some taxpayers with simple tax returns get advice; some with complicated Surtax returns do not get advice. It is up to the individual to make his decision.

Mr. Patrick Jenkin: Is not this another of the anomalies, pursued with such vigour by my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro), of the difference between the Schedule D and the Schedule E taxpayer? Is it not the fact that the Schedule D taxpayer is entitled to set off some part of his accountant's expenses against his tax return, while the Schedule E taxpayer is not?

Mr. Diamond: No, Sir, it is not anomalous. No, the Schedule D taxpayer is not so entitled. [Interruption.]

Consulting Engineers (Selective Employment Tax)

Mr. Bryant Godman Irvine: asked the Chancellor of the Exchequer whether he will now seek to exempt British consulting engineers from Selective Employment Tax, in view of their contribution to exports.

Mr. Callaghan: It is impracticable to exempt them from payment of tax. As promised, in the coming months I will be taking stock of a number of aspects of the arrangements of paying premiums or refunds. But I cannot anticipate now what changes, if any, will be made.

Mr. Irvine: May I take it that one of the intended purposes of the tax is to increase exports? If that be so, why should a business which, in most of its firms, has at least 75 per cent. of its work going in exports be subjected to this tax, and why should it be subjected to the tax when most of its competitors abroad are being subsidised?

Mr. Callaghan: I shall be taking stock of a number of aspects of these arrangements, and this will undoubtedly come into consideration; but I could not give any promise on it.

Bank of England (Gold Guarantees)

Mr. Dalyell: asked the Chancellor of the Exchequer on what terms he has authorised the Bank of England to give gold guarantees in relation to credit held by foreign banks.

Mr. Callaghan: I have authorised no such guarantees and none has been given.

Mr. Dalyell: In that case, could the Treasury public relations officers make this important fact quite clear to the informed Press?

Mr. Callaghan: If we spent our time correcting all the misinformation in the Press, we should not have time to do anything else. But, on this particular matter, which was repeated in a weekly and in a well-informed Sunday newspaper, a correction was put out immediately.

Joint Stock Banks (Savings Accounts)

Mr. Edward M. Taylor: asked the Chancellor of the Exchequer if he will take steps to extend to savings accounts in the joint stock banks the exemption


from Income Tax for the first £15 of interest which is available to those with savings accounts in trustee savings banks.

Mr. Diamond: No, Sir.

Mr. Taylor: Will the right hon. Gentleman accept that, while the trustee savings banks have special arrangements with the Treasury regarding disposal of their funds, to an individual saver this just does not make sense? Is there any way by which he could get round it, and will he provide fair and equal treatment for all savers?

Mr. Diamond: The present arrangement is to provide fair and equal treatment. On like accounts similar treatment is already provided.

American Securities

Mr. J. H. Osborn: asked the Chancellor of the Exchequer what changes have been made by the Treasury in the dollar portfolio; and how much of this has been liquidated since 1st January, 1966.

Sir C. Osborne: asked the Chancellor of the Exchequer to what extent he is continuing to liquefy the remaining portfolio of American securities; how much sales have amounted to in the last three months; what is the holding of cash and short-term bonds to the most recent date; how much of these has been used to support sterling in the last three months; and if he will make a statement.

Mr. Callaghan: I have nothing to add to my Answer to the hon. Member for South Angus (Mr. Bruce-Gardyne) on 28th July.

Mr. Osborn: Will the Chancellor of the Exchequer state what the value of this portfolio is now and how much has been liquidated to date?

Mr. Callaghan: It is not the practice to give details of sales, but no transfers have been made to the reserves since my statement on 5th March last.

Sir C. Osborne: In view of the very welcome answer which the Chancellor gave to Question No. 4 this afternoon, when he said that the position of sterling was very much better—for which we are all very grateful—why cannot he give us more information on this matter, since it is generally felt that we are living on our seed corn? Why not give the details and dispel that wrong impression?

Mr. Callaghan: It has never been the practice to give details of this kind, because they do influence the market. I suggest to the hon. Gentleman that it is not in anybody's interest that he should press me to do so.

Overseas Investments and Allowances

Mr. J. H. Osborn: asked the Chancellor of the Exchequer if he will tabulate in the OFFICIAL REPORT the value of Government investment, Government loans, private portfolio investment, and manufacturing investment, respectively, in the whole world, in the United States of America, in Western Europe, the Commonwealth and developing countries at the present time; what was the income to this country in the year ended 5th April, 1966; and what was the return of capital invested in each of these areas and in total.

Mr. Callaghan: I regret that not all this information can be provided in the form requested by the hon. Member, but I will circulate the available information in the OFFICIAL REPORT.

Mr. Osborn: Can the Chancellor confirm that the drain due to Government expenditure as outlined in the Financial Times is continuing at that rate? Further, will he confirm that return on investment—I mean investment overseas—has been improving over the last five to ten years and state whether or not he expects that this will continue?

Mr. Callaghan: Although I am an avid reader of the Financial Times, I regret that I do not recall that particular article. But I think that the hon. Gentleman, if he studies the statistics contained in the answer to his Question, will find the information he wants.

Following is the information available:


U.K. LONG-TERM ASSETS ABROAD


I. Assets and Income—total







£ million




Value at end-1964
Income in 1964


Official
…
817

27


Private






Direct:






Insurance (1)
…
420

375


Other (2)
…
4,100



Portfolio (3)
…
3,600

148 (4)


Other
…
1,300
(5)
[350] (6)

II. Analysis of certain assets and income by certain areas—value at end-1964, income in 1964


£ million



Official
Direct Investment



Assets
Income
Net Assets
Income


U.S.A.
—
—
410
(7)
46


Western Europe (excluding Irish Republic
26
1
466

24


Common wealth
501
23
2,506

210


Developing countries (8)
523
23
1,394

137

Notes:

(1) Assets incomplete: U.S.A. only.

(2) Assets at estimated book value: excluding oil.

(3) Assets at estimated market value.

(4) Including income on Treasury dollar port folio.

(5) Net assets of oil companies, excluding non commercial real estate and miscellaneous assets.

(6) Including income on private short-term assets and official short-term assets other than (4).

(7) Excluding insurance.

(8) O.E.C.D. definition.

(9) See also "U.K. Balance of Payments, 1966" and Bank of England Quarterly Bulletin 1965.

III. No meaningful figure can be calculated of the return on capital invested in a total of such disparate assets, valued on varying bases.

Double Taxation Agreement (India)

Mr. Goodhart: asked the Chancellor of the Exchequer what consideration is being given to the negotiation of a new double taxation agreement with India, in view of the hardship caused to the British business community in India by the devaluation of the Indian rupee.

Mr. Diamond: There have been discussions with India on a number of occasions about a double taxation agreement, but so far it has not been possible to make one.

Mr. Goodhart: The British commercial community in India faces almost total destruction by reason of the devaluation of the Indian rupee. Does the right hon. Gentleman appreciate that important sections of that community believe that their position could be made tolerable if a new double taxation agreement were negotiated?

Mr. Diamond: I recognise the importance of what the hon. Gentleman says, but there is no point in signing an agreement which does not contain terms which are satisfactory to both sides.

Dr. Gray: Will my right hon. Friend see whether he can do anything to help the few members of the old I.C.S. who remained in Indian Government service and whose financial conditions of service are now affected by rupee devaluation?

Mr. Diamond: That is a very different question.

Capital Gains Tax (Inland Revenue Staff)

Mr. Goodhart: asked the Chancellor of the Exchequer how many members of the staff of the Inland Revenue are wholly employed on work relating to the Capital Gains Tax; and how many are employed part time on making Capital Gains Tax assessments.

Mr. Diamond: Seven officers are wholly employed on Capital Gains Tax, but work on the tax forms part of the duties of a substantial proportion of Inland Revenue staff.

Mr. Goodhart: Is the Treasury making any study of the time which might be saved in staff duties by exempting, say, the first £200 of capital gain from tax?

Mr. Diamond: This question has been gone into many times, and the proposal which the hon. Gentleman has made is not likely to result in any saving of time whatsoever.

Mr. Stratton Mills: Why is it that this staff are unable, with their other duties, to answer the question which I put to the Chancellor yesterday, namely, to give the total forward losses for Capital Gains Tax which have been agreed?

Mr. Diamond: I am not aware of what Question the hon. Gentleman has put to my right hon. Friend.

Motor Car Industry

Mr. Luard: asked the Chancellor of the Exchequer (1) whether, in view of the present difficulties of the motor industry, he will relax the present restrictions on hire-purchase dealings in motor cars;
(2) whether, in view of the difficulties created for the motor industry by seasonal fluctuations, he will introduce variations in Purchase tax or hire-purchase regulations between summer and winter to maintain a more stable market.

Sir G. Nabarro: asked the Chancellor of the Exchequer, in view of the heavy decline in demand for motor cars on the United Kingdom market and consequential increased cost per unit for production of motor cars for export, whether he will relieve purchase tax on motor cars by a reduction from 27½ per cent. to 15 per cent.

Mr. Callaghan: I regret that I cannot propose any relaxations of hire-purchase restrictions or Purchase Tax for the motor car industry at the present time.

Mr. Luard: Will my right hon. Friend agree that the belief that export sales are stimulated by restrictions on the home market has been completely disproved by past experience and that, in fact, export sales have always been highest when home sales have been highest? Is it not clear that it cannot be a contribution to the long-term economic strength of this country to weaken one of our major exporting industries, and will the Chancellor, therefore, at the very least reduce the deposit restriction from 40 per cent.?

Mr. Callaghan: I do not think that it is true that exports are necessarily helped or hindered by a home sales market. What is true is that, if the home market is restricted, there is an increase in unit costs and that, clearly does not help exports. On the other hand, in present circumstances, in view of the need to lower the pressure of demand at home, I hope that motor car manufacturers will press ahead with more exports during the next 12 months, because there is a good long-term market available.

Sir G. Nabarro: I congratulate the Chancellor on his belated recognition that a diminution of throughput of motor cars must necessarily raise unit costs, but does he now understand that in the motor car manufacturing constituencies of the Midlands there is a 30 per cent. decline of output for the home market, which is raising export costs very steeply and making British cars highly uncompetitive in price overseas?

Mr. Callaghan: No, Sir; I do not recognise that. I believe that it is possible to export British cars, given the after-sales service, given delivery on time, and given good quality and reliability. It is not price that is making it impossible to

export them. It is still true that car manufacturers can make a reasonable return on capital.

Mr. Macdonald: Does not my right hon. Friend recall that the practice of controlling the economy by tinkering with hire-purchase deposits was condemned long ago by the Radcliffe Committee as a harsh, abrupt and unreasonable way of controlling the economy? Will he reconsider this matter?

Mr. Callaghan: I acknowledge that, but it is necessary to use the instruments which are available, and in the circumstances of this year it was important to lower the pressure of demand.

Mr. Hogg: Will the Chancellor explain to his hon. Friends that, as the difficulties of the motor car industry are the result of deliberate Government policy, the only way to assist is to change the political complexion of the Government and the political complexion of the membership for Oxford?

Mr. Callaghan: I have a feeling that the burgesses of Oxford City will not want to go back to the days when the right hon. and learned Member for St. Marylebone (Mr. Hogg) was a Minister, when Purchase Tax on cars was not at its present rate of 27½ per cent. but at 60 per cent.

Sir G. Nabarro: In view of the unsatisfactory nature of the Answer about Purchase Tax, I beg to give notice that I shall endeavour to raise this matter on the Adjournment, as I am properly able to do.

Sir C. Osborne: asked the Chancellor of the Exchequer, since the motor car manufacturing industry now expects its gross profit to fall by £40 million as a consequence of Her Majesty's Government's economic policy of creating mass unemployment, how much less taxation he will get from this industry; what other major trades will be affected in the same way; how he proposes to deal with this problem; and if he will make a statement.

Mr. Callaghan: Any estimate of the effect on tax receipts of the current trend of output in the motor industry is highly conjectural, and I have no statement to make.

Sir C. Osborne: The Chancellor must know that the Motor Traders Association issued a statement saying that it expected a reduction of £40 million on its earnings this year, which will mean that he will not collect nearly so much in taxation. This experience will be the same in other industries. Will not this affect his estimates for the collection of taxes from companies during the current year?

Mr. Callaghan: Yes, Sir, but I have no statement to make on it today.

Part-Time Workers (Selective Employment Tax)

Mr. Frank Allaun: asked the Chancellor of the Exchequer if he will seek to amend the Selective Employment Tax so as to enable part-time workers to be employed for 16 or more hours instead of the present eight hours before employers have to pay the tax on them.

Mr. Callaghan: A watch is being kept on the effects of the tax on the employment of part-timers. I shall bear my hon. Friend's suggestion in mind.

Mr. Allaun: While I thank my right hon. Friend very much for that Answer, may I ask him whether he thinks it a good thing for the country or for the individual that elderly, disabled and other part-time workers should be suffering a shake-out because of this? It is already beginning to happen.

Mr. Callaghan: No, Sir. I do not think that it would be a good thing. Indeed, we are keeping a very special watch through the Ministry of Labour on the extent to which this is happening, and I am glad to say that there is no strong evidence yet that it is taking place.

Mr. Patrick Jenkin: Does not the Chancellor agree that we might listen to the hon. Member for Salford, East (Mr. Frank Allaun) with more sympathy if he had supported the Opposition in the Amendments they moved to the Selective Employment Payments Act which dealt with part-time workers, the disabled and the elderly?

Private Industry (Investment and Productivity)

Sir G. Nabarro: asked the Chancellor of the Exchequer, in view of the investment slump in the private sector

of British industry, and calculated decline in productivity in ensuing years resulting from this investment slump, what steps he proposes immediately to take to encourage increased investment in the private sector.

Mr. Callaghan: This matter is under continuous review and the Government will be ready to consult with industry at all times.

Sir G. Nabarro: Has the right hon. Gentleman observed that the Board of Trade itself has postulated a reduction of 7 to 10 per cent. in investment in the private sector next year, and that the C.B.I. has now said that it estimates it at 15 to 25 per cent.? As these are grave figures, cannot the right hon. Gentleman expedite his incentives for increasing industrial investment?

Mr. Callaghan: I did not indicate in my Answer that there are to be incentives for increasing industrial investment. I said that we were ready to consult with industry.

Mr. Barnett: While accepting that, in the present circumstances, any incentives could only be of marginal effect, may I ask my right hon. Friend to bear in mind that there would be a very important psychological effect if he brought forward the payment of the cash grants?

Mr. Callaghan: I will certainly take that into account, but it is primarily a matter for my right hon. Friend the President of the Board of Trade. There are, of course, administrative problems concerned with this, but, although there is clearly some difficulty about liquidity, the real problem for industry is that it must have some belief that there is going to be a long-term market in which to sell its goods. That is why some of the measures proposed would not necessarily achieve the objectives that those who want to stimulate investment have in mind.

Mr. Iain Macleod: Will the Chancellor accept that the aspect of the present economic situation causing most concern is the question of investment, and if, as he indicated in answer to an earlier Question, he sees something of a slide coming in 1967, more serious perhaps than we have seen before, how soon can we expect a statement on the Government's intentions?

Mr. Callaghan: I agree that this is the matter that the House and the country should concentrate on. We need, in present circumstances, to maintain a high level of investment, and it is the Government's desire to encourage this by adopting measures which will successfully stimulate it and will not just mean the expenditure of more public money. I cannot go further today than my original Answer. The matter is under continuous review, and I am ready to consult with industry about it at any time.

Close Companies

Mr. Turton: asked the Chancellor of the Exchequer whether he is aware that uncertainty exists over the effect of Section 77 of the Finance Act, 1965, on the liability for Corporation Tax of close companies; and whether he will publish an explanation of the tests that are being applied by the Inland Revenue to determine the required standard under Subsection (3)(a) of that Section.

Mr. Diamond: I am not aware of any reason for uncertainty. The tests referred to are the same as those which have applied for many years under the company Surtax legislation.

Mr. Turton: Is the right hon. Gentleman aware that some close companies are interpreting the Section as an encouragement to pay the greater part of their profits out as dividends instead of using them for re-equipment and expansion? This would appear to be contrary to Government policy. Will the right hon. Gentleman clarify the position?

Mr. Diamond: There is no reason for that kind of interpretation. It has been made clear time and again that a company which has good business reasons, as laid down in the Section, for retaining profits is entitled to do so irrespective of how small the resulting dividend might be.

Mr. Stratton Mills: asked the Chancellor of the Exchequer if, for the period of the voluntary dividend standstill, he will suspend for publicly-quoted close companies the provision in the Finance Act, 1965, requiring them to increase their dividend where they increase their profits.

Mr. Diamond: No. Sir.

Mr. Mills: Is not this quite a Gilbertian situation? Would the right hon. Gentleman

confirm mat publicly quoted close companies, of which there are a number, are forced to pay out increased dividends on the Stock Exchange if they increase their profits, while publicly-quoted non-close companies are encouraged not to increase their dividends? What possible logic is there in this situation?

Mr. Diamond: The logic of that situation has been explained many times from this Box. There is no differentiation to be drawn between publicly quoted and not publicly quoted close companies. Close companies exist; and for the purposes which we all know—in order to comply with the tax rules and to prevent the avoidance of Surtax—dividends to correspond with the provisions of the Act have to be declared.

Short-term Capital Gains

Mr. Maddan: asked the Chancellor of the Exchequer what was the amount brought in by the tax introduced in 1962 on short-term capital gains for the period until 5th April, 1965; and what is his estimate of the cost of collecting this sum.

Mr. Diamond: About £4½ million. The cost of collection cannot be segregated from the cost of collecting other taxes.

Mr. Maddan: Would not the right hon. Gentleman agree that the ratio of expenses to amount collected under the tax instituted by my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) was a far better ratio than anything achieved to date by the Capital Gains Tax system introduced by the present Chancellor?

Mr. Diamond: I could not possibly offer any statement at all, for nobody knows what either ratio is.

Customs' Waterguard Service (Travel Entitlement)

Mr. Ridsdale: asked the Chancellor of the Exchequer why he has withdrawn entitlement to first-class travel for chief preventive officers in the Customs' Water-guard Service.

Mr. Diamond: As explained in my hon. and learned Friend's letter of 22nd September to the hon. Member, this was a consequential effect of a pay agreement reached earlier this year, and the


arrangements conform with the standing conventions in the Civil Service as a whole.

Mr. Ridsdale: But surely there was no need to take away the privilege of first-class travel from those who had it?

Mr. Diamond: I can only repeat—and the hon. Gentleman will recollect this from his own experience—in the Civil Service these matters are consequential upon salary levels.

Mr. Ridsdale: In view of the unsatisfactory nature of the Reply, I beg to give notice that I shall seek to raise this matter on the Adjournment at the earliest opportunity.

Civil Servants

Mr. Ridsdale: asked the Chancellor of the Exchequer by how many the number of civil servants has increased since 15th October. 1964.

Mr. Diamond: The number of non-industrial civil servants (excluding the Post Office) increased by 19,500 between 1st October, 1964, and 1st July, 1966.

Mr. Ridsdale: When does the Chief Secretary estimate that the number of civil servants will fall below the number which it was on 15th October, 1964, under a Conservative Government?

Mr. Diamond: No such estimate has been prepared.

Mr. Onslow: Would the right hon. Gentleman agree that the total extra annual cost involved must be very nearly £25 million?

Mr. Diamond: The simple normal way of calculating these costs is about £1,000 per civil servant.

Luncheon Vouchers

Mr. John Fraser: asked the Chancellor of the Exchequer if he will seek to increase the concessionary allowance for luncheon vouchers, in view of the rise in the cost of meals since the concession was introduced.

Mr. Diamond: No, Sir.

Mr. Fraser: Is my right hon. Friend aware that the value of this concession

has been progressively reduced by inflation over the past 15 years, placing the recipients of luncheon vouchers at a great disadvantage compared with those who have canteen meals?

Mr. Diamond: I do not know whether my hon. Friend realises that a daily luncheon voucher of 3s. is equivalent to a tax-free payment of some £35 a year and, in comparison with normal canteen subsidies, 3s. is still on the generous side. It was that comparison which caused the original issue of free luncheon vouchers.

Members (Press Cutting Service)

Mr. Allaun: asked the Chancellor of the Exchequer if he will make a statement on the Press cutting service made available by his Department to hon. Members.

Mr. Diamond: My Department does not provide any such service for hon. Members.

Mr. Allaun: I thank my right hon. Friend for the fact that the Treasury pays £2,800 a year towards this new scheme. As he has some responsibility, will he bring the attention of hon. Members to this library, which will help them to do their work far more effectively and more quickly and which is a replica of the service provided by The Times Press cutting service?

Mr. Diamond: I am grateful to my hon. Friend, who is, of course, referring to the service provided by the Library.

Sir G. Nabarro: Is the Chief Secretary aware that a Press cutting service for hon. Members is allowed as a charge against Schedule D but not against Schedule E, and will he therefore reconsider his earlier answer, which was entirely wrong?

Mr. Diamond: I shall be grateful if the hon. Gentleman will send me any particulars, which I shall be only too glad to look into. I expect that the hon. Gentleman was talking about his own affairs. I confirm the precision of the words which I used in my previous statement.

Sir R. Cary: How long has this Press cutting service been in existence?

Mr. Diamond: I think since June.

Mr. Abse: Will it be noted that the Press cutting service will have been charged by the hon. Member for Worcestershire, South (Sir G. Nabarro) as a deductible expense in his capacity not as a Member of Parliament but as a public entertainer on television?

Oral Answers to Questions — SCIENTIFIC AND TECHNOLOGICAL RESOURCES (ADVISORY COMMITTEE)

Mr. Marten: asked the Prime Minister what steps he will now take to further the Government's policy of scientific advance.

The Prime Minister (Mr. Harold Wilson): As the hon. Member knows, the Government are concerned not only to promote the growth of our scientific and technological resources at a rate which is sensible in relation to our needs and resources, but also to ensure that they are deployed to the best national advantage. In addition to strengthening interdepartmental co-ordination for this purpose, we propose to establish a small central Advisory Committee, under the chairmanship of the Chief Scientific Adviser to the Government, comprising not only representatives of the Council of Scientific Policy, the Advisory Council on Technology and the Royal Society, but also some other independent members.

Mr. Marten: In view of the serious rise in the brain drain of scientists and technologists, will this Committee deal with the subject of the brain drain? Secondly, does not the Prime Minister believe that if we had a sensible national space programme, for example, that would retain in this country a number of our space scientists to work in Britain on the frontiers of knowledge?

The Prime Minister: The function of this Committee will be to help to advise the Government on the broadest strategy of allocating resources among some of the fundamental types of research. The hon. Gentleman mentioned space, which is important and highly expensive, and there are others which may be less expensive but perhaps no less important. On manpower and the position of scientists; the increase in the provision for scientists is

helping to provide work for a much more variegated group of scientists than before. This is a question for the Advisory Council on Scientific Manpower.

Mr. Dalyell: In view of the widespread opinion that British science tends to be far too pure, would the Prime Minister make certain that the six Government Departments involved give urgent and coordinated attention to the recommendations of the Swan Committee and, in particular, to the ideas of the Swan Committee on post-graduate work inside industry?

The Prime Minister: Yes, Sir, but the Ministry of Technology was created particularly to expand that part of our scientific effort which means clothing the results of pure science and technological discoveries with "know-how" for the use of industry, and a considerable part of the increased expenditure in the last year or two has been on the practical rather than the pure side.

Mr. Hogg: How does the new body which the right hon. Gentleman has announced tie in with the existing functions of the Council on Scientific Policy, which up to this moment has been performing precisely this rôle? Why does the right hon. Gentleman continually cloak his failure in this department by inventing new gimmicks?

The Prime Minister: For the simple reason, which the right hon. and learned Gentleman, who has enough knowledge to appreciate, will understand, that the Council for Scientific Policy deals with pure research, with the work of the research councils for which the right hon. and learned Gentleman was once responsible. But there is also the whole field of Government expenditure in technological research and the application of science to industry. It is therefore necessary to bring together not only these two, but the Royal Society, which is not a Government body but which also has important functions, so that the whole scientific strategy of the nation can be reviewed by one body. When the right hon. and learned Gentleman speaks of failures, he will recognise the size of the increase in provision for scientific and technological research since he ceased to hold office.

Oral Answers to Questions — HOUSE OF LORDS (HEREDITARY PEERS)

Mr. Whitaker: asked the Prime Minister whether he plans to introduce legislation to abolish the hereditary right to sit in the House of Lords.

The Prime Minister: No, Sir.

Mr. Whitaker: Would my right hon. Friend agree with me that African people, whom some politicians allege to be not ready for self-government, would laugh at the idea of a partly hereditary legislature as ludicrously backward? How long will it be before my right hon. Friend abolishes this feudalism in accordance with his declared policy to root out conservatism in this country?

The Prime Minister: In previous Questions, for example, on 18th November, last year, and subsequently, we have dealt with whether something needs to be done about the powers of another place as opposed to its composition. As for the Africans, I should say that when I had the privilege of meeting the Council of Chiefs in Rhodesia a year ago its members expressed to me that they were ruling by virtue of their noble blood and they expressed the greatest contempt, I am sorry to say, when I described to them how the late Government in this country had modernised this matter by the Renunciation Act and when I told them of the distinguished ex-peers who had sat by hereditary right and had come to the House of Commons to help us here.

Mr. Frederic Harris: Will the Prime Minister please do nothing about another place which will stop his hon. Friend the Member for Fife, West (Mr. William Hamilton) from eventually being sent there?

Oral Answers to Questions — "BUY BRITISH" CAMPAIGN

Mr. Biggs-Davison: asked the Prime Minister whether he will initiate, or give encouragement to, a "Buy British" campaign.

The Prime Minister: Her Majesty's Government strongly support all efforts to persuade British manufacturers and British consumers, in respect of capital

goods, consumer goods and foodstuffs, respectively, to meet more of their requirements from competitive home production, and emphasise the importance of our own manufacturers concentrating on goods which in design, specification and price are comparable with the best that can be bought abroad.

Mr. Biggs-Davison: Have the Government no plan or a propaganda campaign of their own? Are they going to leave it all to the Daily Express?

The Prime Minister: There are some things that I would be happy to leave to it. Its campaign has been welcomed by the Government, as we welcomed its export compaign last year. We should be very glad to see industry generally taking any action to bring to the attention of buyers in this country, industrial or consumers, the desirability of buying British goods, where comparable. We have this through the National Exports Council for some years.

Oral Answers to Questions — POPULATION TRENDS (STATEMENT)

Mr. Biggs-Davison: asked the Prime Minister whether the statement of the Director General of Research and Development at the Ministry of Public Building and Works that Great Britain would have to make room for 20,000,000 more people by the end of the century represents the policy of Her Majesty's Government.

The Prime Minister: This was an estimate based on a projection of current trends and not a statement of policy, Sir.

Mr. Biggs-Davison: What figure has the Prime Minister in mind for the optimum population of the United Kingdom during the rest of this century? If this prophecy is to be fulfilled, has the right hon. Gentleman any plans to provide for a better balanced distribution of the British population throughout the temperate Commonwealth?

The Prime Minister: Since the Government have no causal control over the size of the population I do not consider it appropriate for the Government to have in their mind an optimum figure for the population of the country, either by the end of this century or for any


other time. The material quoted by Sir Donald Gibson, based largely on the best available research in this direction, suggested that the figures would be of this order. He was particularly concerned with building operations and the supply of land to ensure that the population could be properly accommodated.

Oral Answers to Questions — SECRETARY OF STATE FOR THE COLONIES

Mr. A. Royle: asked the Prime Minister on what date the post of Secretary of State for the Colonies will be abolished.

The Prime Minister: I have, as yet, nothing to add to the Answer I gave on the 11th of August to a Question by the hon. Member for Woking (Mr. Onslow).

Mr. Royle: Is the Prime Minister not aware that it is an absurd situation when there are two Cabinet Ministers running one Department? Is he further aware that the same situation applies in the Ministry of Housing and Local Government? Will he not apply his own instructions to industry to cease work-sharing in his own administration in Whitehall?

The Prime Minister: If I thought that it was ludicrous to have two Cabinet Ministers in one Department, I would have to condemn both the Treasury and the Foreign Office in the period of Conservative Government before 1964 when there were two full members of the Cabinet in each Department. With regard to this particular Department, I felt, and still feel, that the amount of work requiring top-level Ministerial negotiations on the progress to independence of colonial countries and the very heavy volume of work from within the independent Commonwealth justified having two Ministers.

Oral Answers to Questions — CHARITIES

Mr. Alexander W. Lyon: asked the Prime Minister if he will recommend the appointment of a Royal Commission to consider the purpose and administration of charitable organisations and to propound a clear definition of a legal charity.

The Prime Minister: Comprehensive changes in the law relating to charities,

based on the recommendations of a committee under the chairmanship of the late Lord Nathan, were made in the Charities Act, 1960. I do not consider that there is need for a further inquiry.

Mr. Lyon: Is my right hon. Friend aware that the Nathan Committee reported in 1952 and that the Charities Act, 1960, specifically omitted to make a definition of a charity, which was one of the foremost recommendations of the Committee? Is he aware that this has led to an increasing body of public opinion who find the whole concept of charity falling into disrepute because so many alleged charities are given tax exemptions and so on when people do not consider that they are charities at all?

The Prime Minister: We all recognise the problem. The question of drafting a more precise legal definition of what is a charity was very fully debated when the Charities Act, to which I referred, was debated in this House. It was then accepted by all parties that the disadvantages of trying to get a precise definition would outweigh the advantages, whatever the Nathan Committee had said. I would have thought that this is probably still the case, but if my hon. Friend has any particular point that he would like considered, either on this or the wider working of the Charities Act, naturally I would be very glad to receive it.

Oral Answers to Questions — OVERSEAS AID

Mr. Alexander W. Lyon: asked the Prime Minister whether the Government will increase the level of overseas aid to 1 per cent. of the gross national product during the period of the United Nations Development Decade.

The Prime Minister: We are already attaining this target, Sir.

Mr. Lyon: Would my right hon. Friend agree that, in achieving this purpose, it makes no economic sense to reduce our commitments to overseas aid by £20 million in the coming year as part of our freeze measures, if overseas aid is designed to build up the economies of underdeveloped countries, thereby increasing our markets?

The Prime Minister: In the first place, I do not think that the motive for aid


or developmental capital should be solely or mainly for the purpose of increasing our markets. It is a fact that over the past few years, under successive Governments in this country, the amount devoted to aid has risen quite considerably and pretty steadily. It has increased considerably in the last two years and is still at a record level for this country. In this situation, when we have had to count every penny of overseas expenditure, it was inevitable that some restriction on the increase—not a cut—had to be laid down for aid, although the cut there is very much smaller than is envisaged in the case of defence.

Mr. Heath: Is the Prime Minister aware that over the four years 1961 to 1965, this country maintained the 1 per cent. of gross national production investment overseas, and that at Geneva in the spring of 1964, at U.N.C.T.A.D., we committed the country to a continuation of this policy? Can he give an assurance that, despite the Chancellor of the Exchequer's policies affecting private investment overseas and the Corporation Tax and other measures, the 1 per cent. will be continued for the next four years?

The Prime Minister: Yes. This is our policy and the commitment entered into by the right hon. Gentleman has been fully met. We are now spending more on aid and developmental capital than we were, even in March, 1964. One thing that we have tried to do, I hope that the right hon. Gentleman will agree fairly successfully, is to see that aid is used to prime the pump of activity within the countries concerned rather than to be a form of charitable aid.

Oral Answers to Questions — RHODESIA

Mr. Sandys: asked the Prime Minister whether he has received any reply from Salisbury to the communication from Her Majesty's Government delivered to Mr. Ian Smith by Sir Morrice James.

The Prime Minister: Only in the form of Sir Morrice James' preliminary impressions, Sir. We still await a formal reply.

Mr. Sandys: Has the right hon. Gentleman at least given up the absurd

pretence that he cannot have any dealings with the illegal régime? Will he now drop his insistence that Mr. Smith must surrender all authority to the Governor before any definitive negotiations can take place, since this is seriously prejudicing the prospects of an agreement?

The Prime Minister: The position with regard to return to legality, which I would have thought the right hon. Gentleman would take much more seriously than he has done, both in this country and on his visit to Rhodesia, was set out in the Communiqué of the Commonwealth Prime Ministers. At this stage, I am not in a position to say what are the latest proposals in Rhodesia. But the right hon. Gentleman must realise that the biggest problem is still the question of the principles which he laid down, the fact that there must be guaranteed and unimpeded progress to majority rule. There can obviously be no agreement, however he tries to spin round the thing with words, if the Rhodesians insist on a braking mechanism on progress to majority rule and if they insist that a white Rhodesian Government must determine the pace of African advance. It was a proposition that the right hon. Gentleman would have rejected two years ago with very strong language indeed, as he did.

Mr. William Hamilton: Would my right hon. Friend make clear what the Government's intentions are on the continuation of the talks about talks? Is it to be understood that these talks about talks will be finished as soon as the point is reached at which the United Nations takes action, or will the talks about talks continue pending qualified acceptance of the six principles by Smith, as he suggested, and simultaneous action being taken by the United Nations?

The Prime Minister: My hon. Friend will realise that, for two reasons, I cannot foreshadow what will happen immediately. The first is that my right hon. Friend has not received in detail and in writing the commentary of those with whom Sir Morrice James was talking, Mr. Smith and his party, so we do not yet know what their final position is. [An HON. MEMBER: "The Tories do."] No, I do not think that they do know. What we have had so far is merely the


impressions by Sir Morrice James on that discussion. That is the main reason.
The second reason is that we have undertaken that the talks going on must be confidential at this stage.
With regard to the position about the United Nations and what would happen if no progress were made, I would refer my hon. Friend to the very clear words of paragraph 10 of the Prime Ministers' Communiqué.

Sir T. Beamish: Is the Prime Minister aware that one of the great difficulties is that the Government's proposals are not sufficiently well known to the Rhodesian electorate? Has he any suggestions for solving this very difficult problem? Would he, for instance, consider the publication in the near future of a White Paper giving the Government's detailed proposals for the return of the Rhodesian Government to constitutional rule?

The Prime Minister: I take the hon. and gallant Gentleman's point. He will realise that the difficulty is that the talks had to be confidential. This was very much the desire of those in Rhodesia with whom the talks were being conducted and of the Governor particularly, and because of the emphasis on confidence it is not possible to appeal to the Rhodesian electorate on the basis of the not only highly reasonable but indeed basically honourable proposition which we have put forward and on which we must insist. That is why it would not be possible to do what the hon. and gallant Gentleman suggests.
The other problem is that even the pictures of my right hon. Friend meeting Mr. Smith and many other germane questions were censored by order of the censors there from appearing in the Rhodesian Press.

GIBRALTAR

Sir Alec Douglas-Home: Sir Alec Douglas-Home (by Private Notice) asked the Secretary of State for the Colonies, in view of the closure by the Spanish Government of the frontier at La Linea to all traffic except pedestrians and the announcement by the Governor that the Colonoy will face "an indefinite period of savage restrictions", what preparations have Her Majesty's Government made for carrying on the life of Gibraltar.

The Secretary of State for the Colonies (Mr. Frederick Lee): The exact implications of the new restrictions cannot yet be fully assessed, but the Governor's reports so far indicate that this latest Spanish measure is unlikely, of itself, to cause serious economic difficulty.
I am in constant touch with the Governor and I am satisfied that he has plans to meet future contingencies.

Sir Alec Douglas-Home: First, is the right hon. Gentleman aware that much of this deplorable misunderstanding would have been avoided if the last Foreign Secretary had been willing to be explicit about British sovereignty over the Rock and the isthmus? Will he request the new Foreign Secretary, or do so himself, to remedy this situation without delay and say that the Government will sustain British sovereignty against all threats in all circumstances?
Secondly, is not the Secretary of State much too easily satisfied? The House will not be satisfied with the kind of general assurance which he has tried to give today. We shall want to know what detailed steps he is taking to sustain the life of the Rock which is in serious and definite danger. Will he, therefore, make a statement to the House at the earliest possible opportunity, giving in detail what the Government are doing?

Mr. Lee: The first part of the right hon. Gentleman's supplementary question was obviously directed to my right hon. Friend the Foreign Secretary, who has a number of Questions to answer on that subject on Monday. The assurances which I have given to the House are based entirely on the Governor's statements to me. I think that it is quite clear that what has been announced is not instituting a blockade. We are faced with a partial closure of the land frontier between Gibraltar and Spain—partial simply because the pedestrians are still being allowed to go through.
I think that the House would be well advised to realise that no merchandise has gone through for a long time and that the vast bulk of Gibraltar's trade has always come by sea. The only difference which this latest step will make is in the supply of fresh fruit and fish, and alternative arrangements are being made for that.

Sir Alec Douglas-Home: Is not the right hon. Gentleman Colonial Secretary, and is he not responsible for declaring the British Government's view on sovereignty over the Rock? Therefore, why did he suggest that we should wait for his right hon. Friend the Foreign Secretary? Why cannot he do it now?

Mr. Lee: I do not think that that is a fresh question at all. I remember that in the days when the right hon. Gentleman was Foreign Secretary he answered Questions on foreign policy.

Mr. Ogden: Would my right hon. Friend give the House a straightforward assurance that all the resources of the United Kingdom will be placed at the disposal of the Government of Gibraltar if they require them?

Mr. Lee: Gibraltar received certain capital aid from this Government in 1965. They have also received some temporary assistance. We are now about to begin discussions with them on the kind of assistance which they need in future. I do not think that they will find that when it comes to dealing with Fascist dictators we are as soft as right hon. Members opposite.

Sir F. Bennett: First, is the right hon. Gentleman aware that his answers provide the best possible justification for an earlier Question about the disappearance of his Office as soon as possible? Secondly, can he enumerate one single thing which has happened since the talks began under duress other than a steady deterioration of Gibraltar's position under the appeasement of the present Government?

Mr. Lee: One thing which we did not do was to give them any frigates. The marked deterioration began before talks commenced, and not after.

Mr. John Lee: Would my right hon. Friend bear in mind that there are many hon. Members on this side of the House who have become increasingly disturbed by what is happening? Would he bear in mind that some of us have a sneaking suspicion that Gibraltar is being traded in to satisfy our gallant allies the Americans in their cold war policy?

Mr. Lee: All I can say is that there is not the slightest basis for truth in my hon. Friend's statement

Mr. A. Royle: Would the right hon. Gentleman give a firm assurance to the House that Her Majesty's Government will stand firmly behind the people of Gibraltar in the present difficulties which they are facing? Would he give a categorical "Yes" to that question?

Mr. Lee: The present Government have stood very firmly behind the people of Gibraltar, and we have no intention of wavering.

Mr. Winnick: In view of the deep concern in this country, can the Spanish Government be told in simple language that in no circumstances do the people of Gibraltar want to live under a Fascist dictatorship, a dictatorship supported over the years from the beginning by the Opposition?

Mr. Lee: Again, I think that that is a matter for my right hon. Friend. There are Questions for answer on Monday on this subject.

Mr. Heath: Is the right hon. Gentleman aware that yesterday the Governor called on the inhabitants of Gibraltar to face what he described, I think, as a savage blockade of indefinite duration and said that the British Government had offered help? Is it not evident from what the Colonial Secretary has said that the Government have made no preparations whatever for carrying out this undertaking? Will he please accept that the House cannot be satisfied with this? When will he be prepared to come to the House and tell us explicitly how the Government will carry out their undertaking to help Gibraltar to maintain its way of life?

Mr. Lee: The right hon. Gentleman has distorted the whole picture. Ever since the beginning of this business the Government have been in the closest touch with the Governor and Ministers in Gibraltar. We are still in touch with them. The plans which we have for assistance to the Government of Gibraltar are ready, but if the right hon. Gentleman and his hon. Friends think that I am going to inform the Spanish Government what they are, they can think again.

Mr. Emrys Hughes: Is the Minister aware that the preparation which the Tory Government made for an eventuality of this kind was to sell frigates to Spain?

Mr. Thorpe: Can we have an assurance that at least in regard to this colonial territory, adequate contingency planning will be carried out? Will the Colonial Secretary consider two possibilities: first, that there will be difficulties about the Spanish workers coming in from La Linea; and secondly, that there will be a cessation of the steamer services from Algeciras? Will the Government do some contingency planning to meet both these eventualities?

Mr. Lee: Yes, we are well aware of the problem concerning Spanish labour. I have made it clear that at the moment there is no threat of any type to Spanish workers going into Gibraltar. I have made it clear also that the vast bulk of Gibraltar's trade is done by sea and not by land. We will be quite happy to assist in making sure that it remains that way.

Mr. George Jeger: Since my right hon. Friend the Colonial Secretary is still apparently in charge of the affairs of Gibraltar, does he not think it advisable that he should make the three-hour trip as soon as possible to Gibraltar, to meet the people of Gibraltar and find out the position for himself?

Mr. Lee: I am so far in charge of the affairs of Gibraltar that arrangements have been made for some time. I cannot yet give the date.

Mr. Sandys: Does the right hon. Gentleman realise that he is speaking an entirely different language from the Governor? Why is he trying to belittle the seriousness of the situation? Since, apparently, he is still in touch with the Governor, could not the right hon. Gentleman co-ordinate his views with him and present a clear picture to the House of Commons?

Mr. Lee: The right hon. Gentleman will be gratified to know that most of the things I have said today are based on reports sent to me from the Governor.

Several Hon. Members: rose—

Mr. Speaker: Order. We must move on.

MATRIMONIAL CAUSES

3.43 p.m.

Mr. Leo Abse: I beg to move,
That leave be given to bring in a Bill to amend the law relating to divorce.
On two occasions in this House—[Interruption.]

Mr. Speaker: Order. The House has decided to take Ten Minute Rule Bills at this time. It must listen to the hon. Member in seeking to introduce one.

Mr. Abse: On two occasions when Bills were presented to the House—in 1951 by my hon. Friend the Member for Flint, East (Mrs. White), who is now Minister of State for Foreign Affairs, and in 1963 by myself—the House has given a Second Reading to Bills which were designed to introduce into our law a new ground of divorce based upon the principle that a formal marriage bond which has no vitality, where the spouses are bound no longer, where they are irreconcilably estranged and where they have been apart from each other for very many years, in many cases entertaining intense hatred one of the other—that such a bond was not performing the social function of a stable and sound marriage and that it should be possible within our divorce law for it to be ended.
On each occasion the expressed wishes of the House were subsequently frustrated: on the first occasion by the appointment of a Royal Commission which, after a very long period of deliberation, gave an ambiguous and divided Report which stemmed the tide of reform, and on the next occasion, in 1963, by the effective manipulation of procedural stratagems by a cabal in this House prompted by Church opposition, which a more timorous Parliament suffered without over-much protest. After those episodes, I certainly would not lightly raise the hopes of those who would be affected by such a Bill, because I know that their hopes can be raised and dashed yet again.
There are tens of thousands of people in this country who are bound to a dead marriage, who are no longer able to remarry even though their own marriages have been dead perhaps for decades. They are bound to marriages which,


because of the envy, spite, neuroses or the religious beliefs of a former spouse, are never able to re-establish a personal relationship on a legal basis.
Worse, into these thousands of permanent cohabiting unions which are in existence of unmarried people there are born probably up to 200,000 illegitimate children, who, in many cases, live in an atmosphere which perforce must be replete with guilt, anxiety and feelings of insecurity which only too often are conveyed to the sensitive antennae of children who are born to such unions. Therefore, since people do not understand our procedures, I would not lightly seek to introduce a Bill of this kind if I did not think it important that the House expressed a point of view.
As the House will know, the Law Commissioners are currently engaged upon questions of our matrimonial law. They have said in their annual report that they have decided to make no attempt to formulate views on such topics as the grounds for divorce and powers for relief until after publication of the report of the Commission set up by the Archbishop of Canterbury, which is also examining these questions, under the chairmanship of the Bishop of Exeter. They stated that that report would be of great value as an indication of the present state of an important and responsible section of public opinion.
The House will know that that Church committee has reported. Hon. Members will recall that it is a strange but detailed report. The House knows that the reason for the Church's original opposition to the principles embodied in the Bills introduced by my hon. Friend the Minister of State for Foreign Affairs and myself was that they introduced what was described by the Churches as a dangerous new principle into divorce law: that of marriage breakdown witnessed by very long separation of the spouses.
Our laws have been, and are, based upon the doctrine of the matrimonial offence. This means that if a man or woman wishes to have a divorce—even if both parties wish to have a divorce—the court must be satisfied before it is granted that adultery has been committed, that cruelty has been caused, or that one party

has left the other without his or her consent for a period of three years.
It is to be noted that it is the insistence upon those grounds for divorce that has hitherto brought our divorce laws into disrepute. It is well known that if two people wish to obtain a divorce it is possible by one committing adultery for that divorce to be obtained. More, if the mutuality between the two parties is concealed and masked from solicitors or judges, as frequently it is, it is possible for a court to be deceived into granting a divorce on the ground of desertion.
Since most divorces, too, on the ground of cruelty are undefended, often allegations are puffed up and exaggerated with the acquiescence of the other partner in order that the divorce may go through. It is notorious that these practices continue. It is well known among our population, and I believe that it is substantially because of this that our divorce laws are in disrepute.
Therefore, I am now pleading for those who find themselves joined in a dead marriage contracted years ago, who are unable to regularise their relationship or legitimise their children. When they are told that the existing law is in existence because of the need to maintain it out of respect for the marriage contract, it is inevitable that they regard such a comment as cruel sententiousness.
Since the Church report now has, to its credit, totally somersaulted from its original position, and since it has adopted all the arguments of the secular divorce law reformers and, indeed, marshalled them with greater skill than they ever did, even though it is to everyone's amazement, it is important that the doctrine of the matrimonial offence should be called into question.
The Church report says generously that it was prompted as a result of my Bill. It may not be inappropriate, even if it is a little mischievous, to suggest that no pronouncement by the Church has been received with such amazement since Balak called upon Balaam to curse the Israelites and instead he blessed them.
What, then, is the argument now? The argument is that the church, having adopted the divorce reformers' ideas, have done it with the zeal of the proselyte. They say that it must be all or nothing and that the doctrine of the


marriage breakdown must be the sole reason why divorce should be granted in this country.
Unfortunately, everyone knows that that would impose an impossible burden upon the courts. There is not the legal manpower and the social worker manpower to be able to convert our divorce laws away from the present accusatorial system into an inquisitorial system. Every five-minute undefended divorce could take days, and the financial burden upon the Exchequer by way of legal aid would be intolerable. If the recommendation of the Church report was accepted, it would mean that the aspirations of those thousands of people in their present difficulties could be postponed for ever.
Therefore, I am asking that this House should do what has been done in New Zealand, Australia and in some dissimilar form in Belgium, which is that where the parties to a marriage have been separated for not less than five years and where the court is satisfied that the marriage has broken down irrevocably, subject to safeguards such as maintenance provision for a former spouse or, of course, for the children of a former marriage, the court should have discretion to grant a decree of divorce.
I do not put this forward because I believe in easier divorce. I believe in a

more rational divorce law and that ultimately, perhaps, what the Church report has spelt out will become law. I believe, now, that a marriage is meaningless unless it is based upon and rooted in the family. If family life has been ended for years, it is absurdity to pretend that the marriage goes on, even though it is a destructive agent severely damaging another family life which has been brought into existence.
I hope that the House will give me leave to introduce the Bill so that the Law Commissioners may know clearly that, when they put their recommendations before the House, we can expect those recommendations to be sensitive to the needs of those thousands of people who, for their own sake and their families, desire desperately to regularise their lives and legitimise their children.

Question put and agreed to.

Bill ordered to be brought in by Mr. Abse, Mr. John Parker, Mr. Nicholas Ridley, Mr. Emlyn Hooson, Dr. Michael Winstanley, and Mr. Iorwerth Thomas.

MATRIMONIAL CAUSES

Bill to amend the law relating to divorce, presented accordingly and read the First time; to be read a Second time Tomorrow and to be printed. [Bill 112.]

Orders of the Day — ABERFAN DISASTER (TRIBUNAL)

3.55 p.m.

The Prime Minister (Mr. Harold Wilson): Mr. Speaker, I beg to move,
That it is expedient that a Tribunal be established for inquiring into a definite matter of urgent public importance viz. the causes of, and all the circumstances relating to, the disaster at Aberfan, Merthyr Tydfil, on Friday the 21st day of October 1966.
After the statement of my right hon. Friend the Secretary of State for Wales, the expressions of deep sympathy from all parts of the House and the tributes to the selfless devotion of all who have toiled in Aberfan, to pass this Motion is all that we as a House can presently do.
Our sense of the inadequacy of this action in the face of this bitter tragedy is an expression in a Parliamentary sense of the utter powerlessness that we all felt, those of us who were in Aberfan last Friday evening, in the presence of that massive and cruel elemental force which had destroyed the life of a community.
All that we can do is to set in motion the machinery of an independent and authoritative public inquiry. That the Government were right within a few hours of the tragedy to announce the inquiry, that it would be judicial in character, that it would be public—all this, I believe, has been accepted by the House and the country—and that, through Lord Justice Edmund Davies' acceptance of the Government's invitation to lead the inquiry, we are confident in the conduct of the inquiry. That, too, has been shown by the comments of hon. Members in all parts of the House yesterday.
That the inquiry should start without delay—Lord Justice Edmund Davies is in Merthyr today—is the desire of all of us, and it is equally, I am certain, the general desire of this House that the inquiry be clothed with all the powers that it may need to get at the truth. It was after consultation with the learned Judge that my right hon. Friend and I felt that these powers could be given only by action under the Tribunals of Inquiry (Evidence) Act of 1921.
I should perhaps add this word of explanation. During the past few years

many hon. Members—myself among them—have expressed criticism of the Act, and, as the House knows, a Royal Commission was appointed in July, 1965, to examine its working and to make recommendations for any amendments to the Act that might be needed. But doubts about that Act should not prevent us from recognising that whatever changes may or may not be needed, it is that Act—and that Act alone today—which can be invoked for the purposes required.
No inquiry, no action within our power can ever set back the clock to nine a.m. last Friday. Nor can it restore to their grieving parents, and sisters and brothers, the children who lost their lives. A speedy building programme can replace the houses destroyed but it can never recreate the homes that were destroyed. Still less can any action in our power restore to this bereaved community the loss of an entire age-group, practically all the children between 8 and 10.
All we here today can do is to provide part of the means of reaching the truth, for that truth must be known. It is not, I submit, for us to seek today to anticipate those findings by any comment or speculation on our part. We have the fullest confidence in the learned Chairman, and his colleagues—who, I hope, will be named tomorrow—to provide what poor solace can be provided by their findings about the cause of the tragedy, and, perhaps more important now, to make recommendations which might prevent a repetition of that tragedy in another area, perhaps even another land.

4.0 p.m.

Mr. Edward Heath: I rise to support the Motion which has been moved by the Prime Minister. We agree with the Government that it was right that an inquiry should be held. We also agree that these powers should be given to Lord Justice Edmund Davies for the purpose of carrying out the inquiry. As the Prime Minister has said, anxieties have been expressed from both sides of the House from time to time about the methods which have been used by tribunals under this Act. I have every confidence that Lord Justice Edmund Davies would perhaps be able to take account of some of those anxieties in the Tribunal over which he will be presiding with distinction, so as to avoid some of what


we have felt to be the unfairness and embarrassments which have arisen on previous occasions.
My hon. Friends and I have joined with the Government in the expression of our sympathy towards the families and the friends of those who have been so suddenly and tragically bereaved in this disaster. I can only speak personally, but I find my mind is still numb at the thought of the immensity of personal grief caused by it, and the irreparable blow which this small and closely-knit community has so suddenly suffered. I believe that all we can do is express our sympathy and show our understanding.
The whole House will probably agree that the nation owes a debt of gratitude to all those—whether individual men and women, voluntary organisations, local government, civil defence, or military services—who worked tirelessly throughout those days to try to alleviate a ghastly situation. Tribute has been paid to them already, but I believe that the House would think it appropriate that from this Box I should pay tribute to the Secretary of State for Wales and his colleagues, whether Ministers or officials in the Welsh Office, for the immense efforts they made personally at the scene of the disaster during those days. It is right that the House should recognise the splendid work which both Ministers and officials did on this terrible occasion.

Hon. Members: Hear, hear.

Question put and agreed to.

Resolved,
That it is expedient that a Tribunal be established for inquiring into a definite matter of urgent public importance viz. the causes of, and all the circumstances relating to, the disaster at Aberfan, Merthyr Tydfil, on Friday the 21st day of October 1966.

Orders of the Day — PRICES AND INCOMES

4.4 p.m.

Mr. Speaker: Mr. Michael Stewart.

Mr. John Boyd-Carpenter: On a point of order. I should like to ask you, Mr. Speaker, whether the Motion which the right hon. Gentleman is about to seek to move is in order. I can make my submission very briefly. It is that this Motion seeks the approval of the House for an Order which is not validly made, and is made without any statutory authority.
Let me put my submission in this way: it is accepted that on 5th October Part IV of the Prices and Incomes Act was not in force. On that day Her Majesty in Council was advised to make this Order—Statutory Instrument 1262—in exercise of the powers conferred on her by Section 25(1) of the Prices and Incomes Act, 1966, and all other powers enabling. It has not been suggested in any quarter, whether in correspondence in The Times or otherwise, that there are any other powers than those conferred by Section 25. That Section is the first Section in Part IV of the Act.
My submission is that a Section which is not itself in force at the material time cannot be used to put itself into force and to put into force the remaining Sections of that Part of the Act. If that submission is right, what the House is being asked to do is to debate and approve what is not a valid Order and what is not, indeed, a document worth the paper that it is written on. In my submission, to ask the House to do that would be an abuse of the procedure of the House.
I would add that the Government, also, according to the Order Paper, are seeking to do so before this Statutory Instrument has had the scrutiny—that in all the circumstances might have been important and helpful—of the Statutory Instruments Committee.

Mr. Speaker: The latter point is one of detail which is not for Mr. Speaker.
I am grateful to the right hon. Gentleman for informing me, with his characteristic courtesy, that he intended to submit an argument to the Chair that an Order in Council made under Section 25 (1) of the Prices and Incomes Act is invalid and is, therefore, unappropriate


and out of order for the House to debate today.
In his submission the right hon. Gentleman further argues that there is no Parliamentary authority for the making of the Order in Council and that, therefore, the Motion to approve the Order is ineffective. This is certainly a matter of public importance, and one to which I have given prolonged study.
I have in front of me the Prices and Incomes Act, and for greater clarity I propose to read Section 25 (1). It provides that
At any time in the period of twelve months beginning with the date of the passing of this Act Her Majesty may by Order in Council bring the provisions of this Part of this Act into force for the remainder of the said period of twelve months.
An Order in Council made under this subsection shall cease to have effect at the expiration of a period of twenty-eight days beginning with the date on which it is made unless before the end of that period the Order has been approved by a resolution of each House of Parliament.
I have to ask myself whether I would be justified in withholding the Question on the Motion from the House, and whether to do so would be within my authority and consistent with the rules and practice of the House. Dealing, first, with the subject matter of the Motion, I have no authority to withhold a Motion from the Order Paper if it is framed in appropriate terms. The rule that matters awaiting adjudication by a court of law should not be brought before the House by a Motion does not apply to Bills or to delegated legislation.
Secondly, the Chair is not concerned with the merits of this or any other Motion. Provided that the Motion itself does not offend against the rules of the House its legal effect or validity is not for me to interpret. These are matters for the House itself, or, at a later stage, for the courts to decide. All I have to do is to consider whether anything out of order would be taking place when I call upon the Minister to move the Motion, or when I propose the Question for approving or disapproving it to the House.
I cannot find anything in the past practice of the House which would suggest that the Chair should intervene to prevent

a discussion of this Motion, and I therefore call the Minister to move it.

Mr. Boyd-Carpenter: I am much obliged, Sir.

4.9 p.m.

The First Secretary of State and Secretary of State for Economic Affairs (Mr. Michael Stewart): I beg to move,
That the Prices and Incomes Act 1966 (Commencement of Part IV) Order 1966 (S.I., 1966, No. 1262), dated 5th October, 1966, a copy of which was laid before this House on 5th October, be approved.
That, in form, is the Motion before the House, but I believe that we all recognise that this must be set in the context of the incomes policy as a whole and of the present economic situation. I want to start with a proposition which I believe commands approval in nearly all quarters of the House. That is the proposition that there should be a link between productivity, prices and incomes and that that necessary link cannot be secured merely by relying on what are called the "forces of the market", that is to say, by leaving things to work themselves out, but that Government have a part to play in seeing that there is this link between productivity, prices and incomes and that institutions must be set up to see that there is an incomes policy and that its real purpose is that there should be together a planned growth of productivity, prices and of incomes.
I say that I believe this to be agreed in nearly all parts of the House, but I think that it will be necessary for the right hon. Member for Enfield, West (Mr. Iain Macleod), who is to follow me, to make it clear that that is still so. It was so at one time. Members of the party opposite set up the late National Incomes Commission, they spoke themselves of a wages policy and I believe that they were considering a Commission on Prices, but we are bound to notice that some voices in the party opposite, even quite recently, have been pronouncing not merely against the policies of the Government but against the whole concept of an incomes policy.
If the Members opposite are to make anything approaching a valid criticism of the Motion, it must be in the context of a clear statement of whether or not they believe in an incomes policy at all. On this side at any rate, we believe in


a policy of productivity, prices and incomes, and the background to the present situation is that the foundations of this policy were being steadily laid in the period since this Government came into power.
If I spoke much about what has been done about productivity, I should probably be going outside the rules of order for this Motion. I will refer only very briefly, for example, to the increasing work of the Economic Development Committees, to the projected work of the I.R.C., to the work of the Ministry of Technology, to the fact that important considerations affecting productivity will emerge from the work of the Royal Commission on Trade Unions and Employers' Associations, to the steps taken for retraining which were outlined to the House last night by my hon. Friend the Parliamentary Secretary to the Ministry of Labour and to the fact that, at the recent National Productivity Conference—despite some attempts to disparage it in advance—there was, even in face of the present difficult situation, a widespread confidence that the Government are going ahead with the measures which will lay the solid foundations for advancing productivity in this country.
Meanwhile, the foundations have also been laid for an effective prices and incomes policy. There was a move on from the narrower conception of a wages policy, which the previous Government considered, to the wider conception of a policy affecting all incomes and prices. It was agreed that, while N.E.D.C. should be the body concerned with the study of general trends affecting prices and incomes, there should also be the National Board for Prices and Incomes to deal with particular cases. Agreement had been secured on the broad principles and criteria which should govern either advances of incomes or increases or decreases of prices.
However, we have to recognise that, although this progress has been made, the idea of actually putting into effect a policy on productivity, prices and incomes was still unfamiliar in practice in this country. For many years, I think, it had been part of the general conversation, not only of the politically minded, not only of those well-acquainted with industrial and economic matters, but of the general

conversation of the whole body of citizens, that we ought to be able to find something better than a free-for-all and a continual spiral of prices and money incomes.
To that extent, people were familiar with the idea. What I think none of us was fully familiar with was the turning of this from a concept in the mind, an aspiration, into a working reality. We found—I make no bones about this—that there was a tendency, in the months preceding July, for example, to treat a norm for incomes of 3 per cent. or 3½ per cent., not as a norm but as a floor, a basis on which anyone might frame increases, and a tendency also in each particular case for the interested parties to contend that the criteria should be interpreted so as to give a favourable answer to them.
I am confident that, given time, not merely the concept, but the actual practice of a prices and incomes policy will be familiar to us. It was a misfortune that, before that sufficient measure of time had passed, we were faced with the many particular events which were detailed to the House by my right hon. Friend the Prime Minister on 20th July, which moved the economy off course.
I think that the choice which we had to make in July, therefore, was this. Are we, faced with this situation and this first, though serious and heavy, wind of difficulty blowing against the prices and incomes policy, on that ground to abandon the concept altogether, or are we to weather this storm by exceptional measures in prices and incomes—exceptional and temporary—to carry us through these difficulties with the concept of a prices and incomes policy unimpaired and capable of being put into full effect by a nation which will perhaps—all of us: Government, management, industry—have learned from the period of adversity?
That was the choice which faced us in July. During the debates in July, both on the Prices and Incomes Act and on the general economic situation, naturally, alternative policies were urged upon the Government which it would be outside the scope of this debate to discuss in detail. But it is fair to make the point that, even if those alternative policies had been adopted, we would still have had to face this question. This nation is at the beginning of trying to turn the prices


and incomes policy from an idea into a reality. That process is threatened by serious but temporary difficulties. Are we, because of that, to let the concept go by default—as would have happened if we had not planned for standstill and severe restraint in July—or are we to accept the need for standstill and severe restraint, so that we can preserve for full and productive use in a more fortunate time the vital concept of a prices and incomes policy?
That, I believe, was the choice, and I am sure that the judgment that a period of standstill and a period of severe restraint were necessary was a right judgment. I believe that that view is sup ported by the great majority of the House and by the overwhelming mass of opinion in this country, and, indeed——

Mr. J. J. Mendelson: Since my right hon. Friend accepts that alternative policies were urged upon the Chancellor and the Government in 1965, will he not allow for the possibility that if those alternative policies had then been adopted the Government and the country would not have faced a crisis on 20th July? [HON. MEMBERS: Hear, hear.]

Mr. Stewart: We allow for that possibility, though I think that some of the hon. Members who said "Hear, hear" do not agree with my hon. Friend's policies. We allow for that possibility, but I do not believe it to be the case. But even if it were, and even if my hon. Friend is convinced that these difficulties arose because the Government were wrong and he was right, he cannot escape the fact that the difficulties were there and that we had to choose between dealing with them by standstill and severe restraint, or allowing them to overwhelm the concept of a prices and incomes policy as a whole.
I believe that the decision to have a period of standstill and then a period of sever restraint was accepted not only by the House, but by the overwhelming mass of opinion in the country. I think that that has been shown by the extraordinary measure of restraint on the part of managements and trades unions in endeavouring to make the standstill and the period of severe restraint work. It was for that reason, and I think rightly, that the Government felt that the parts of the Prices

and Incomes Act which contained exceptional powers of legal compulsion ought not to come into force at the same time as the rest of the Act, but that the Government should be required to face Parliament again if that necessity arose. We were anxious to make it clear to the country that we recognised, and were grateful for, the wide measure of general acceptance, and that while powers of compulsion might be necessary, they ought not to be rushed into.
There was this wide general acceptance, but there were also some breaches of the standstill. Some actually occurred in wages. We had reason to fear that there would be breaches in prices of a character that might endanger the standstill as a whole. For that, I think, was the consideration—not can one point to any case, however tiny, either in wages or in prices, but is there a danger of something happening on a sufficient scale, and of sufficient significance, to endanger the standstill as a whole?
What happened was that there were challenges, and it was clear from the way in which public interest was focussed on them that if these challenges had been successful the whole principle of standstill would have been endangered, because it is a general characteristic of people of this country, and possibly of human beings as a whole, that they are prepared to make sacrifices, they are prepared to put up with difficulties, provided they feel that other people are playing the game with them. They will accept a great deal on that principle, but they will complain, and, I think, rightly, about what might appear to be a featherweight task if they feel that it is unjustly imposed on them while others with no better case go scot-free.

Mr. William Molloy: In that context, would not my right hon. Friend agree that if penalties are to be dished out they must also cut right across the board, and not be restricted to one sector?

Mr. Stewart: As I shall show when I come to that part of the Act, that is what happened.
We felt it right in that situation to advise Her Majesty to make the Order in Council introducing Part IV. I need not spend very much time in outlining the provisions of this part of the Act. I simply say that in the first instance, from


the moment that Part IV came alive when the Order in Council was made, Section 30 was part of the law. This is the Section which gives an employer, in the circumstances laid down in the Section, and provided he adopts the procedure there set out, a defence against actions for breach of contract which would otherwise be successful.
When the Prices and Incomes Bill was before the House, it was argued by the Opposition that we ought to put Section 30 in the Bill in a form which would not need an Order in Council to bring it alive, that it should come into force with the rest of the Act. One can argue that to and fro, but we felt that this provision was a serious one. It is meant to be only a temporary one, and we thought that it was showing more respect to the House so to arrange matters that if it appeared necessary to bring this temporary and exceptional provision into force the Government should have to face Parliament again before that could be done.
The other effects of Part IV were to bring into force Sections 26 to 29 under which the Minister can make Orders affecting prices and wages. These Orders are of two kinds: there are those which can be made under Sections 26 and 28 for prices and for wages respectively, which has the effect simply of halting the price or the wage at the level it is when the Order is made. I think that it will be clear to the House that if one proposes to make an Order of that kind one cannot give long overt notice of one's intention, or one is simply inviting the parties concerned to push up the price or the wage before the Order is made.
On the other hand, there are Orders under Sections 27 and 29, again for prices and wages respectively, which do not merely halt the price or wage, but which can bring them down to the level at which they were on 20th July last. This is reasonable, and the Act provides that if I should have it in mind to make an Order of that kind I must give notice of my intention to do so, and there must be a period of at least 14 days during which the parties concerned can make representations to me.
That, I think, in essence, is the substance of Part IV which we are discussing today, and I want now to look at its

possible effects in relation to wages and prices.
It should be noticed, of course, that so far very limited use has been made of the power to make Orders under this Act, and I trust very much that that will continue to be the situation. I believe that it will continue to be the situation because the promptness with which such use as has been made was made is an indication that the Government sympathise with the widespread general acceptance of the standstill, and are using these powers simply to give expression to the wishes of those who have sought to work the standstill voluntarily.
As the House will know, actions for increased wages were brought against Thorn's, and in respect of newspaper printing and distribution. I do not think that it is an unfair summary of the situation to say that here we had an attempt to reject the principles of the standstill, an attempt by a group of workers who could not be described at all as among the least fortunate, or lowest paid, to improve their position at a time when the great majority of their fellow workers, some of them much less well-off, were prepared to accept the standstill.
That was the situation with which we were faced. If they had been able to succeed in that, they would have been better off by sole virtue of the fact that they were not prepared to hold back, they were not prepared to co-operate, when the great majority of their fellow-workers were so ready. In that situation—and I am reinforced in this view by the consultations which I had with the trade unions—there would have been deep resentment among large bodies of other workers if the Government had not acted.
We have to bear in mind here the position of workers much less well paid than these groups. We have also to remember the trade union leaders representing those lower paid workers, who would have been put in an impossible position if it could be shown that others had been able to steal a march on them in this fashion.

Mr. Norman Atkinson: It was precisely the fact that the Government unfroze the doctors' pay from 1st October this year that caused some of these decisions to be taken. The Government decided that when they pay the


doctors on 31st December they will, in fact, by virtue of paying them three months in arrears, be unfreezing the doctors' pay from 1st October. While we agree that the doctors should get the money, we point out that it is the Government who were the first to break their own freeze.

Mr. Stewart: But these things were known at the time. The whole of the negotiation of the doctors' salaries has been common knowledge for some time. I think that my hon. Friend is aware of the reasons why that decision was reached. I may say that it was not a decision wholly welcomed by the doctors themselves. But it was in the knowledge of that decision that the great majority of trade unionists were still prepared to co-operate with the standstill. I therefore say that my conclusion stands and that we were justified in making the Orders affecting the Thorn workers and the workers engaged in newspaper printing and distribution.

Sir Tatton Brinton: In referring to the increase in the printing industry, the right hon. Gentleman ought to make it clear that this was one of the cases in which a contract already existed before the freeze. It might have been inferred from what he said that they had negotiated some additional increase after the beginning of the freeze. I do not think that that is the case.

Mr. Stewart: But they were by no means unique in that. The whole point is that a great many workers in the same position were still prepared to work the standstill. I believe that the reason why we had this support from the great majority of workers is that they all know very well—and my hon. Friends know that this came out more than once in the debates at the Brighton conference—that if we had not had a standstill but had had a free-for-all, then a free-for-all would hit the weakest hardest. This realisation was in everybody's mind.
My hon. Friend the Member for Ealing, North (Mr. Molloy) referred just now to criminal proceedings under the Act. I want to say a few words about that because, very rightly, there is considerable anxiety about this. In answer to my hon. Friend's question, I should like to make it quite clear again that with this

Act, as with all Acts, people who break it are subject to penalties. If there is an Order requiring that prices shall not be raised above a certain figure, then to raise those prices is an offence under the Act and criminal proceedings could follow. The same is true, as hon. Members know from their familiarity with the Act, on the wages side of the argument.
But I should like to emphasise how many steps there are between the first possibility of a breach of the Act and criminal proceedings. This is not an Act which puts the unwary in peril or under which there is any risk of criminal proceedings being taken vexatiously on trivial grounds. In the first place, to get to a position where criminal proceedings have to be taken, there has to be some proposal either in wages or in prices of a kind which is large enough and significant enough to threaten the standstill, because unless that happened the Government would not consider making an Order at all.
Let us suppose that the first step is passed and that the Government are considering making an Order. In the case of Section 27 or Section 29 Orders—and it is unlikely that criminal proceedings, if they arise at all, would arise on anything but Section 27 and Section 29 Orders—there would, in the first place, in addition to anything which the law requires, be a process of informal consultations between the Government and the parties concerned. That is the second step.
The third step, if those informal consultations failed to reach agreement, would be the announcement of notice of intent to make an Order and a period of at least 14 days during which representations can be made. Only after that would one come to the making of the Order itself if, again, the formal consultations have brought no agreement.
The fourth step, after that, would be, once the Order were made, if there were a deliberate defiance of it, either in wages or in prices; and even then a prosecution does not automatically follow. No prosecution can be initiated without the approval of my right hon. and learned Friend the Attorney-General. This is a safeguard against prosecution on purely trivial grounds, A sixth step is that the case has to come to court, and the court has to decide both that the Order made was within the authority conferred on


the Minister by the Act and that the act of defiance had actually been committed. Finally, the court can impose the fines that are stated in the Act. No question of imprisonment would arise except if, at the end of that long process, the person concerned decided deliberately not to pay the fine.
I have spelled these things out because it is important to notice that while this law, like all law, must have penalties for those who break it, it is so drafted as to ensure that there is no peril to the unwary, that there is no reckless use of criminal powers.

Sir Cyril Osborne: If the deterrent is to be so long delayed before being applied, how can it be effective?

Mr. Stewart: Let us suppose that the hon. Member knew that there was an Act of Parliament which said that a certain action was an offence but that he could not be prosecuted without the fiat of the Attorney-General and that there were full possibilities for consultation before he even committed the offence. We cannot, of course, take a prosecution before the offence has been committed, and a large part of what I have said indicated the opportunities there were for consultation and wiser counsel before the offence was ever committed.
But let us suppose that the offence is committed. Then, as in a number of other Acts, the fiat of the Attorney-General is required and the process must go to the courts. Would the hon. Gentleman cheerfully decide to break the law on the ground that the law which he intended to break required the Attorney-General's fiat for a prosecution and that there was a chance that he might get off when he came to court? Is that how he would behave? If not, why does he think that other people would behave like that?

Sir C. Osborne: The right hon. Gentleman has explained that this action may take a long time and may never be taken. How, therefore, can there be a real deterrent to the people who may break the law?

Mr. Stewart: Several of the steps which I have described are steps before there is any defiance of the law. I am pointing out that before we make an Order and before there is any question of offending, there is a full process of consultation.

Surely that is right. We could have so drafted the Act that the orders could be made immediately without any chance of representations. We could have left out the provision about the Attorney-General's fiat. The hon. Gentleman might then have felt that this was a sharper instrument, but it would have been a far less appropriate instrument for the situation with which we have to deal.

Mr. Mark Carlisle: The right hon. Gentleman made great play of the fact that under Sections 27 and 29 consultations must take place before an order can be made on which a prosecution can later depend. Surely, under Sections 26 and 28 no consultation of any kind is required, but a conviction can still follow.

Mr. Stewart: I have said that it is far less likely that this situation of criminal proceedings would arise under Section 26, for this reason—that Sections 26 and 28 do not make provision for an Order which instructs someone to put a wage or price down. They merely say that the wage or price may not be raised. Further, there is provision for one to go to the appropriate Department in respect of prices and of wages to argue that the Order ought to be so varied as to allow some increase on what one was charging when the order was made. The way of reason and consultation is always open. The danger of criminal proceedings arises only for those who reject the way of reason and consultation.

Mr. Emrys Hughes: rose—

Mr. Stewart: I hope that there will not be too many interventions.

Mr. Hughes: From an entirely different angle, I represent miners and I assure my right hon. Friend that there is great concern among Scottish miners, especially those in my constituency, that at the end of this process they may find themselves in gaol. If that is the case, how does my right hon. Friend think that productivity will be increased if this process results in the whole coalfield thereby coming to a standstill?

Mr. Stewart: I think that what I have said will make it clear that the likelihood of that happening is very remote indeed.

Mr. Hughes: But possible?

Mr. Stewart: Of course it is possible.

Mr. Hughes: Yes.

Mr. Stewart: I hope that if my hon. Friend relates correctly to his constituents what I have said he will find that the result is that any apprehensions of the widespread gaoling of his constituents are not well-founded.
Concerning prices, I should make it clear at the outset that in the standstill White Paper it was clear that some increases in prices could be regarded as justified, as could some increases in wages, even during the standstill. For example, this would apply where some of a group of workers had received an increase and others had not. In both cases therefore—prices and wages—some increases were justified. Or, for example, those that could properly be set down to the operation of S.E.T. or those which were due to, say, a rise in the price of imported materials or causes genuinely outside the supplier's control, although it was required that a genuine attempt should be made to absorb those cost increases.
It seems to me that while Part IV is in force—and I have to decide what use to make of the power to make Orders—I must look at the principles laid down in the White Paper with regard to both wages and prices. It would be a queer kind of justice if I were to say that if I ever make an Order affecting wages I must make one affecting prices, and vice versa. In every case the question I have to ask is whether or not a projected increase is within the very narrow provisions of the standstill White Paper.
It would not be legitimate to object to a price increase if it was clearly and genuinely due to an unabsorbable effect of S.E.T. It would be legitimate to object to a price increase which purported to be caused by S.E.T., but which, by its amount, clearly could not be justified on that ground. It is in that spirit that the power to make Orders must be used.
In the administration of the powers in regard to prices a great deal depends on a careful watch being kept on prices, which is a more complex and varied sphere to watch even than wage settlements and I should tell the House that the Ministries concerned—notably the Ministry of Agriculture, Fisheries and

Food and the Board of Trade, and, to a lesser, but, nevertheless, important extent, the Ministries of Public Buildings and Works and Technology—have considerably extended the arrangements they have for early warning about price changes.
In the sphere of agriculture, fisheries and food, for example, there is a very wide extension of the early warning system, which will normally mean advance notice of 28 days of any projected increase in prices. That cannot apply to certain commodities which are liable to sudden market changes—fresh fruit and vegetables, for example—and for that there is a liaison committee of which suppliers, wholesalers, retailers. The Government are represented and are keeping a constant watch on that type of price.
The Ministry is, of course, primarily concerned with manufacturers' prices, but there is also an advisory group in the retail food trade on which leading figures in the retail world are represented, and they will also get the maximum possible notification of any intended changes in prices. Meanwhile, the Ministry, in 50 sample towns, is keeping a watch on prices.
There are comparable though, of course, different arrangements in the Board of Trade and the Ministry of Public Building and Works and these have, in effect, already secured early warning arrangements covering a number of building materials—bricks, cement, glass plasterboard—and are negotiating to extend to a much wider range of building materials.
In addition to the Ministerial watch on prices, a month or so ago I asked the public if they genuinely felt they were being overchanged to let the relevant Ministry know. I do not accept the proposition that a housewife who genuinely thinks that she is being overcharged and who reports the matter to the Government in a period of standstill is in any way acting as a snooper or spy. She is legitimately protecting her interests.

Mr. Norman Buchan: I should have thought that the chief worry of the housewife was not being called a snooper or spy, but whether the Ministry was taking any action on her representation.

Mr. Stewart: I am coming to that.
To judge from the public response, the suggestion made in certain quarters that the public would reject or dislike this is completely without foundation. We have received a considerable number of letters, although I will not say that all of them have been reasonable. Some of them, like hon. Gentlemen opposite, complained about the postal charges—[HON. MEMBERS: "Hear, hear."] It is a fair answer to that to say that this was not something—whatever one may think about the justification for it; and this has been argued in the House—that could be dealt with in this context, because this, like certain other aspects of the matter, was made clear at the start, on 20th July. However, one topic on which we received a number of complaints was laundries. And since there has been some criticism of the Section 26 Order which I made on laundries, I want to tell the House something about it.
The National Board on Prices and Incomes had laid down that about 4½ per cent. might be a reasonable increase in laundry prices. We found a very varied picture affecting different laundries and we found that some of the increases were approaching 10 per cent. Clearly, there was something to be investigated here, and in some cases a rather detailed investigation was needed. It seemed reasonable, pending such detailed investigations, to halt any further rises by an Order under Section 26.
One of my hon. Friends yesterday complained that this was locking the stable door after the horse had bolted. To that I make two comments. First, if he will notice the comments of the launderers, he will see that there were other horses still in the stable after the door had been closed. Secondly—and I do not wish to say this in any way prejudicing what I hope will be a fair judgment—we will have to continue investigations in certain cases; and, having made an Order under Section 26, that would not preclude an Order being made under Section 27.
I wish to be fair about this, for I know that some of the laundries say, "We had not already made an increase. Are you not allowing those who have already done it to get away with it?" But the Order is flexible the other way. It is possible for them to make representations about why their prices should be allowed

to exceed the prices when the Order was made by such amount as may be specified.
We preserve a flexible position, but, meanwhile, we have decided to halt a further increase in laundry prices. Some have objected to this as a blanket way of dealing with the question—[HON. MEMBERS: "Cheap."] I am sorry, but I am quoting the objections that have been made in certain quarters. Would they have preferred us to have done nothing at all? I do not think that that would have been right. Neither would it have been right to have proceeded quickly before proper investigation of Section 27——

Mr. Julian Ridsdale: rose—

Mr. Stewart: I do not think that I should give way further. Many hon. Members want to speak.

Mr. Ridsdale: rose—

Mr. Stewart: No, I will not give way.
Since there has been criticism by the Confederation of British Industry that the Order relating to laundries was made without proper consultation, I want to make this clear. The Confederation's objection was, first, that it was a sort of sweeping use of the powers. To that, I have already answered. The other objection was that there was not sufficient time for the Confederation to consult us about the Order. I may have seen this wrong, but it seemed to me that if one makes an Order of this kind it must be made at very short notice. As I mentioned earlier, that is the nature of a Section 26 Order. If one gives considerable advance open notice that one intends to make an Order of this kind it is an invitation for prices to rise immediately.
The C.B.I. claims that the time allowed between when it was called in and the Order was made was so short that it could not be called consultation at all. It is fair to reply that while the time was very brief, the Confederation did not actually ask for delay in the making of the Order. But, again, to be fair, that may have been because the Confederation felt that it had not been put in a consultative atmosphere. However that may be, I now give the perfectly plain and definite assurance that if it should be necessary to make Orders there


will be more time than there was on this occasion.
Clearly, however, the time cannot be unlimited, and might be brief, but it would be time that any reasonable person would regard as time for what could properly be called proper consultation——

Sir Robert Cary: rose—

Mr. Stewart: No.
This applies not only to price Orders vis-à-vis the C.B.I. but to wage Orders vis-à-vis the T.U.C. I should also say that I do not propose in any sense to make reckless use of this power. It must be selective—[Interruption.] I answer this because these were the kind of accusations that were thrown at me. I propose to proceed by consultation.
I must admit that I am sometimes tempted, as when one of my hon. Friends drew my attention to the fact that the Glasgow Conservative Club has raised its subscription by an amount that S.E.T. could not possibly justify. [Interruption.] After the most careful consideration, however, I have decided not to make an Order here, since there is another reasonable course of action open to the members, which is to withdraw from its membership. And in the semi-judicial position in which I am, I could not conclude that a reduction in the membership of this club was necessarily contrary to the public interest.

Sir R. Cary: rose—

Mr. Stewart: No.
I should refer briefly to dividends, although there is no legal control of dividends in the Act. I will do so by mentioning that since the period of standstill began there have been 628 quoted dividends. There are, of course, a number of companies of which the dividends are not quoted, but many of those are companies which, by law and for purposes of taxation, are required to make a distribution and so do not really come into the argument. Of the 628 cases where there are quotations, there has been no change in 453, 151 have gone down and 24 have gone up. Of those 24 increases, half have been minimal—simply to round off a figure—and others had

been made earlier in the period when, possibly, there was not time to make the necessary changes.
I have spoken of wages, prices and dividends, and I should like to speak briefly about the future. There is the standstill which lasts to the end of this year, and there is a period of severe restraint for the first six months of next year. We must all understand that during that period there cannot be widespread acceptance of claims relating either to prices or wages. There can be some, but it will have to be a period of severe restraint. I am now working out with the trade unions and with industry the principles that ought to govern our action then, and the way in which particular cases can be dealt with.
Without anticipating those discussions unduly, I can say that it is clear that, for example, pay increases immediately and directly related to productivity have a claim. We shall seek also to give help to the lowest-paid workers, though it is the plain corollary there that if those workers are really to be helped what is done for them cannot be used as an excuse for comparable increases all the way up the scale. Other criteria have to be considered, and these I shall be hammering out. I hope before long to be able to lay before the House and the country what we have been able to agree.
Above all, during the period of severe restraint, Government, trade unions, industry, one way or the other—and we are still discussing what is the best way of doing it—will, I believe, find that they have to develop a habit of consultation, whether by informal discussion, whether by formal meeting, or not. It was out of the bitterness of the 'thirties that the world learned something of what we now call Keynesian economics. It often happens that out of a period of restraint and difficulty we learn techniques that are valuable in happier times.
So I believe it will be on this occasion, because beyond the period of severe restraint it will still be necessary—and I take up now the theme I mentioned at the beginning—to have an incomes policy, a linking of productivity, prices and incomes: the principle outlined by my right hon. Friend the Chancellor of the Exchequer at Brighton, that when there are claims by anyone for increased


income—workers for wages or landlords for rents—it must be recognised that the bargaining power of the two parties is not the only thing that matters; that the public interest is there as a third party.
Various suggestions are made as to how this could be done. Some have suggested the use of Part II of the Prices and Incomes Act, but on that the Government would not proceed without the fullest consultation with industry and with the trades unions. There were suggestions in an article in the Economist involving further use of the Prices and Incomes Board. There have been suggestions that industry and the trades unions, within themselves, might take a greater responsibility in this field. These things, I believe, we shall work out during the period of standstill and severe restraint, but one way or another I think that we all know that it has to be done.
I would ask again of the right hon. Member for Enfield, West what the view of the Opposition is on whether or not there should be an incomes policy. The view of some of them is well known. The right hon. Member for Barnet (Mr. Maudling), in the Budget debate on 14th April, 1964, argued most strongly in favour of an incomes policy, but alas, I see that as recently as yesterday the right hon. Member for Wolverhampton, West (Mr. Powell)—whom we thought was a reformed character, reformed either by grace or compulsion—seems to have lapsed. He was saying yesterday that an incomes policy—not the Government's incomes policy, but an incomes policy—is nonsense, and dangerous nonsense. He still from time to time is a Front Bench colleague of right hon. Gentlemen opposite.
We ought to know what the Opposition's view of an incomes policy is. Of course, the right hon. Member for Wolverhampton, West was not always of this view. This is what he said when he was a member of a Conservative Government:
It seems to be the fashion in some quarters to treat the National Incomes Commission as a joke and the Government's"—
That, is the last Government's—
wages policy as a thing of the past. There could hardly be a greater misconception. The validity of the policy is unchallenged and unchallengeable.
I appeal from the right hon. Member for Wolverhampton, West of one period to

the right hon. Member at an earlier period, or, if I may make an innocent classical allusion which he would be the first to appreciate, I
appeal from Philip drunk to Philip sober".
The particular incomes policy as an incomes policy itself has got to be set in a setting of other measures. During this period of standstill and severe restraint the Government are proceeding with the study of those measures that will lead to revival, and early revival, of the economy. We have to consider when and in what form encouragement should be given to investment, what additional provisions can be made for industrial retraining for the greater mobility of our labour force, and the effective follow-up there can be of the many valuable ideas put forward at the National Productivity Conference. But, meanwhile, if we are to have the opportunity to do these things, we must recognise the immediate necessity of the standstill.
I commend this Order to the House because it itself recognises the necessity of the standstill, because it reflects the desires of the huge majority of people who want to see the standstill work and want an effective incomes policy, because it protects the public-spirited against the selfish and where necessary the weakest against the strongest and gives us the opportunity to frame a just incomes policy which is a necessity of preserving our balance of payments which in itself is a condition of our national recovery. These are issues with which we are concerned. They are in my judgment sufficient reasons for commending the Order to the House.

5.4 p.m.

Mr. Iain Macleod: I should like first to welcome the First Secretary of State and Secretary of State for Economic Affairs to our economic debates. He is a somewhat less exuberant character than his predecessor, but no doubt we shall get used to that. It was certainly "Philip sober" whom we heard speaking today.
We were interested, Mr. Deputy-Speaker, in the Ruling that Mr. Speaker gave in response to my right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) in which Mr. Speaker said—and with respect I entirely agree—that on the question of order what we were doing was clearly in order as a


matter of House of Commons order, but the question of its legality was not for him and was one which could if necessary be challenged elsewhere. I am also grateful that Mr. Speaker has allowed the scope for this debate which goes wider than the immediate question of the date for introduction of Part IV.
The right hon. Gentleman, who was clear and exact—as he always is, and we welcome this—in what he said, underestimated, in my view, the importance of what the House of Commons is being asked to decide today. He roared as gently as any nightingale, but if one wants to study Part IV it is enough first of all to read the side-heading of Section 30, and secondly to look at the opening words of Section 31. The side-heading to Section 20 says:
Authority for employers to disregard pay increases in existing contracts.
That is what we are considering.
Section 31 says that those who are protected by the Wages Councils Act, as once they were protected by the Trades Boards Act, shall not—for the time being at least—enjoy that protection and that the hand of the Ministry of Labour is withdrawn from them. I do not think that we, the House of Commons, ever thought that a Government would come before us and ask for authority to disregard pay increases that have been properly negotiated. I do not think we thought that any Government, least of all—I mean this as a compliment—a Labour Government, would ask for authority to withhold awards from the very poorest of our citizens that have been awarded to and are needed by them. It is this that we are deciding tonight if we give authority to the Government to introduce Part IV.
Let there be no doubt about the Opposition's attitude. We oppose this Order and will oppose the Orders that will be made under it—many of which, perhaps all of which, I should give notice to the Leader of the House, we shall wish to discuss. We should like full time to debate them, not at the end of the day but, as on this occasion, as the main Order of the House, because this, as those short extracts I have read show, is one of the greatest invasions of principle that this House has been asked to sanction in peace time.
I know perfectly well what the excuse is. The excuse is necessity. William Pitt answered that long ago when he said that necessity is always the excuse, it is the plea of tyrants. What we have to decide is whether the necessity, what is called the national interest—this is a desperately difficult thing to define and a very dangerous thing for Ministers to say they know the answer to—whether that overriding necessity enables us to give consent to this Order.
The hon. Member for Ebbw Vale (Mr. Michael Foot) was quite right when he said on the Third Reading of the Bill on 10th August:
there is a most curious feature of the Bill. As far as I can recall, it is the only Bill I have ever heard presented which is recommended chiefly on the ground that its principal features will never be applied."—[OFFICIAL REPORT, 10th August, 1966; Vol. 733, c. 1772.]
Now they are being applied and we are taking the one step forward which so many of us, on both sides of the House, have always foreseen, because it is in the nature of this Government's economic policy that it slides from indifference to panic, from exhortation to threat, and finally from co-operation to compulsion.
I want to turn for a time to the use which the First Secretary so far proposes to make of these Orders. He has given notice in the Thorn case and the newspaper case through the London Gazette, and he has made an Order in relation to laundries. He invites comments on the Thorn and the newspaper cases, and I respond to him on that point.
It is inconvenient, if a large number of these Orders are to be made, that the London Gazette is not available to Members in the ordinary way in the Vote Office, but has to be photostated by our excellent service in the Library. Perhaps the right hon. Gentleman will see whether he can assist the House on that particular matter.
I wish to take up some legal points and to address myself for the moment, not to the larger point raised by my right hon. Friend the Member for Kingston-upon-Thames, but to some points arising out of these proposals. I do not ask for an answer today, but let us at least look into this pit before we decide to leap into it. Let us take the Thorn case: 4th April, 1966, was the date from which a rise from


£20 to £21 for supervisors was agreed. The agreement was actually reached on 12th July, before the statement of 20th July, and the case in September won the decision. That result surprised nobody.
Section 30 gives an employer only the right to refuse increased remuneration above the level obtaining on 6th October, which is the date on which Part IV came into operation. Section 30 applies only when the contract giving the increase was made before 6th October and the increase is not to take place until after. Therefore, it will not of itself provide any defence for Thorn.
The Government can prosecute Thorn, or anybody else who finds himself in this position, if they pay levels above that of 20th July. Equally, employees can sue for the rate up until 6th October. I do not know what happened in this particular case.
Another point which seems to me to be clear—again, I have taken advice on this—is that the ascertainable remuneration at 20th July is not the actual amount paid but the actual amount legally due to be paid; in other words, not £20, but £21. We can be quite certain that these points have not escaped the astute Mr. Clive Jenkins and his advisers.
I have one more general point. These particular Orders— to me very curious coming from  Labour Government—affect only union members. Because they affect only  members, there is nothing to prevent non-union members from being paid any increase they can get, although doing precisely the same work as those who are controlled. I never expected such a proposition to come from the Socialist Party.
If these and many other forebodings have truth in them, there could be no doubt that the reason is that the Government insisted on pushing down Parliament's gullet in the dog days before the Summer Recess legislation that was ill-planned and botched up.
It may be—because these arguments are already being discussed, as the Attorney-General knows very well—that the Government think they have an answer to this in the proposition that, once an Order has been made under Section 28 or Section 29, it becomes illegal for the employer to perform the contract in

accordance with its terms. I would not dispute that, but I wonder if the Secretary of State has at least considered the implications of that. It means that there cannot be a legal and illegal contract running simultaneously. It means that the contract has only one level of remuneration, and that is too high and therefore forbidden. It means, I submit, that the right to sue under that contract has been taken from the employee. He can put forward a quantum meruit argument of reasonable reward, but that is in no way an answer to the rights which have been taken away.
I am sure the Attorney-General recognises that these are most serious points which I have taken a few moments to dwell on. I do not want to ask the Leader of the House, unless he wishes to launch into these fields, to deal with them tonight.
I come now to the question of the Order about the laundries. If the proposals in relation to wages are foolish, the proposal in relation to prices is both perverse and illiterate. It is shooting at the wrong target. It is dealing with the symptoms and not with the disease. It is trying to cure the spots and not trying to cure the measles. It is forgetting something that was wisely said recently in the Wall Street Journal:
Price increases cause inflation no more than wet pavements cause rain".
That is exactly true. It is not the wet pavements—it is not the symptoms—one needs to deal with. It is the underlying and fundamental malaise. The First Secretary of State knows very well, in spite of everything he said today, that he has lost at one stroke the sympathy and the understanding of the C.B.I. He must have known that it was already under very heavy attack from its constituents for the degree of co-operation it thought it right to show—I am not criticising this—in support of policies that very many of its members believed to be profoundly inimical to their own interests. The depth of anger is shown very well by the comments of Mr. John Davis immediately after he heard the news:
We feel absolutely betrayed by the manner in which the Government have imposed control on laundry prices".
Why has this been done? The Times states that 300 letters—the Secretary of State did not give any different figure


today—have been received from members of the public about laundries. I received more than that concerning the Selective Employment Tax. If pushed to it, my constituency alone could outdo that on the animal lobby alone. Yet apparently this is to be the standard of judgment in future.
There is a 5 per cent. increase in very many cases. There is a 33⅓ per cent. increase in the price of a cup of tea in the Smoking Room, if the First Secretary of State wants to know. I can get 300 signatures against that particular proposition.
We know very well what this is. This is a victory for the hon. Member for Lewisham, West (Mr. Dickens) and for 300 self-appointed narks who have agreed to follow the very ill-judged invitation of the First Secretary.
I have here a complaining letter, but I want to read very briefly the point made by the laundry concerned. It says:
Payment of the Selective Employment Tax commenced on 5th September, 1966. The total cost to this company on a full year basis will be £9,000. In addition to the above, we shall also have to pay increased petrol tax and shall have to bear increased charges from other service industries. In accordance with the national policy we shall endeavour to absorb these additional costs but have no option but to recover the S.E.T. from our customers".
Every single item recorded there is a deliberate action of this Government to increase prices. The Selective Employment Tax was recommended to us exactly on this basis. The petrol tax just referred to is again part of the Chancellor's measures for deflation. The increased charges from other service industries are no more than a secondary effect of the Selective Employment Tax working through the whole economy, as we have warned the Treasury Bench over and over again that it would do. In this case those who have had to suffer from the Selective Employment Tax are now being doubly penalised by the Government for their reaction to it.

Mr. Gwilym Roberts: The right hon. Gentleman is very critical of what he regards as these deflationary taxes. Could he suggest how he would have proposed to raise the same level of taxation?

Mr. Macleod: It would not have been necessary to raise anything like this amount if the Chancellor had listened to the advice which he was given from this side of the House about acting earlier and not waiting until the autumn before any action was taken.
One other instance was sent to me by two old-age pensioners, in complaint against an increased service charge. The letter from the co-operative society concerned said:
During the last 12 months operating costs have increased considerably. Much more is now having to be paid in wages, in transport expenses and in Government taxes. The Society finds that the delivery of orders to members' homes constitutes a heavy expense. It has decided to seek a contribution towards the costs by introducing a charge of 6d. per parcel".
That comes from the Enfield Highway Co-operative Society, the society which sought my help in opposing the S.E.T., when I assured it that we would oppose it fiercely but that we were less confident about the attitude of the Co-operative Members of the Labour Party.

Mr. John Rankin: As a Co-operative and Labour Party Member, I remind the right hon. Gentleman that, had he been taking an active part in opposing the tax, he would have seen that the Co-operative Members demonstrated the opposition in the House and did their best by every Parliamentary means to convince the Government that the tax was wrong.

Mr. Macleod: The hon. Member had better refresh his memory by looking at the Division lists, particularly that for the Division to impose the Guillotine and thereby stifle discussion of the Co-operative case in particular.
Price control has a superficial attraction, but I am sure, and I believe that the First Secretary of State would agree, that it does not really work. It could not work even with an army of civil servants. For new products there is and there can be no old price structure. It is often unfair in the sense to which the First Secretary of State drew attention this afternoon, inasmuch as those who have held back their prices may now be penalised. If I may repeat a metaphor which I used at the Blackpool Conference, to control prices is literally, in many instances, like controlling the weather,


because there is no bigger single influence on prices in this country and throughout the world than the weather. It is an illusion which I hope that the right hon. Gentleman will now abandon that he can control prices, even with the aid of a vast bureaucratic machine.
I want to make a brief reference to Statutory Instrument No. 1021, which is on the Order Paper today as the subject of a Prayer, under my name, and then pass from it. We do not intend to move this Prayer when the time comes because our vote on the larger issue will take it into account.
But the House of Commons should take into account what has been done. On 12th August, the day that Parliament rose, and the day that the Prices and Incomes Bill received the Royal Assent, the Government by Order withdrew the entire Second Schedule to the Bill, which was in itself a White Paper, and substituted an entirely different White Paper which will now have to be construed by the courts as part of the ordinary body of statute law. This is ridiculous. There is no reason why speeches made by the right hon. Gentleman or the Leader of the House to their constituents should not in this way be enshrined as Schedules as part of legislation, and then the courts will have the job of construing them.
I hope that the Leader of the House will take this matter into account and refer to it when he winds up. It struck us as very curious and somewhat disingenous—I am glad that the hon. Gentleman is here—that when the Under-Secretary of State was asked about it at about 5.30 in the morning of 10th August, he gave no indication that this would take place. Yet, with only one day intervening, and as soon as the House rose, the entire Second Schedule to the Bill, which was a formidable one of a number of pages, was swept away by Order and an entirely different Schedule was put in its place.
I do not want to comment on the legal aspect of this at great length but it is, to put it mildly, surprising that a thing like this should be done, and it was disingenuous of the Under-Secretary not to tell us—if, indeed, he knew—what was in the mind of his Minister. I do not know whether he knew or not, but he should have known. The responsibility

for these matters rests mainly with the Prime Minister who made the statement on 20th July. I have already shown how little the Under-Secretary knew in this instance about what is going on, and shall quote briefly from what he said on 14th July on the Second Reading of the Bill:
… may I make it clear again that there is opportunity in the normal way for negotiations to continue during the period when the Board is preparing a report. There is no delay in that respect. Claims can be made; negotiations may go forward. There is no interference at all in that respect with free collective bargaining. I hope very much that there will be no further misrepresentation about the Government's attitude and what the Bill says in this respect."—[OFFICIAL REPORT, 14th July, 1966; Vol. 731, c. 1850–1851.]
It was a ridiculous state of affairs when, six days later, the Prime Minister made the gravest economic statement we have heard since the war.
I am sorry that the Minister of Labour is not here, but he did attend part of the debate. He and his Parliamentary Secretary are perhaps the best-liked team of Ministers in this Administration. But it is infinitely depressing to anyone who knows the Ministry of Labour well, as I do, to see how it has deteriorated, and how the Minister has become little more than a bell-hop to the Prime Minister. It is very foolish of him to travel the country calling the people dishonest and thriftless. It is very foolish to do as the Parliamentary Secretary did last night, basing herself on unemployment statistics and comparisons that will look very absurd in a few weeks, let alone a few months. Above all, it is midsummer madness for the Minister of Labour to turn his great Department into a sort of local office of the Inland Revenue for the administration of the Selective Employment Tax.
The net result is that now, when we need the Ministry of Labour as never before, the work of the local offices is clogged up with administering the Selective Employment Tax and work subcontracted to it by the Treasury. We know very well, and this showed again yesterday at Question Time, how deeply unhappy the Minister of Labour is about the Selective Employment Tax, the work which pulls against everything which all Ministers of all parties have tried to do at St. James's Square, and the burdens that have been put on the Ministry.
The Prime Minister is not here and I shall not comment at length on him. I shall simply read an extract from what he said on the "Election Forum" last 10th March:
I do not think that you can ever legislate for wage increases and no party is setting out to do that. Once you have the law prescribing wages I think that you are on a very slippery slope. It would be repugnant, I think, to all parties in this country. As to the idea of freezing all wage claims, salary claims, I suppose, dividends, rents … I think that this would be monstrously unfair".
So indeed do I.
On 20th July, he said:
It is not our intention to introduce elaborate statutory controls over incomes and prices."—[OFFICIAL REPORT, 20th July, 1966; Vol. 732, c. 636.]
In Washington, where he was singing a very different tune on 29th July, he said:
We have taken steps which have not been taken by any other democratic Government in the world. … We are taking steps with regard to prices and wages which no other Government, even in wartime, has taken".
That is what he said. But Part IV is what he did.
I shall not spend time on the little hare which the First Secretary went chasing after when he started his speech and again when he ended it. I shall gladly send him a copy of my Blackpool speech which dealt with that, if he wants it. He mentioned three names, my right hon. Friend the Member for Barnet (Mr. Maudling), my right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) and myself. We had a detailed debate on incomes policy in the summer. Perhaps the right hon. Gentleman was occupied in another sphere and did not read it. It was opened by my right hon. Friend the Member for Barnet, it was wound up by myself, and the Motion which we put before the House and debated was signed also by my right hon. Friend the Member for Wolverhampton, South-West. We need not spend any time on that matter.

Mr. M. Stewart: We need not spend much time on it, but perhaps the right hon. Gentleman will just answer this question. Yesterday, at The Guardian "teach-in"—this is reported in The Guardian—the right hon. Member for Wolverhampton, South-West, presumably speaking for the Conservative Party, said that an incomes policy, that is to say,

any incomes policy, is "nonsense—and dangerous nonsense". The right hon. Gentleman need not take much time, but perhaps he will say whether he agrees or disagrees with that.

Mr. Macleod: I disagree with it, and I said so specifically and in terms at Blackpool. I shall send to any hon. Member who wants it a copy of that speech.
We believe that the Government are on the wrong course. Let us try at least not to blind ourselves with scientific terms. Deflation does not bring about redeployment, and redeployment in its turn is merely an escapist name for unemployment. We do not know how high the figure of unemployment will go.
I want, for a few moments, to return to what the House of Commons will recognise as a hobby-horse of mine. Well before July, and at the time of the July measures, I asked the House, so far as it could in these highly charged matters, to consider unemployment on a nonpartisan basis, to recognise that the achievements of the parties in maintaining full employment are statistically almost exactly the same, and to recognise that we need today a new definition of what full employment ought to be in terms quite different from those thought appropriate, and rightly so, by Lord Beveridge with the memories of the 1920s and 1930s behind him.
That is all I say, but I say it once more to the House on this occasion. We shall have this recurrent bitterness and these charges thrown back and forth because the figure under the Labour Party may well go over the figure in the winter of 1962 and of 1963. Yet there is, of course, on both sides of the House not only a desire but a determination to maintain full employment in this country.
There will no doubt be—I ought to make our attitude clear on this—siren voices speaking today urging reflation on the Government. I hope very much that the Government will resist them. There is already a danger in the double effect of the Selective Employment Tax, with the enormous punch which is taking place at present through the interest-free loan and then the great release of spending power which will come when repayments start. If we have set out on this rough road, the Government ought to work it.


But there is one sector to which I draw the attention of the House, and the Chancellor of the Exchequer acknowledged today at Question Time that it is one foremost in his mind, namely, the question of industrial investment in the private sector.
This Government, being, in our view at least, foolish and improvident, have dismantled the vastly superior provision which was made by Tory Administrations. The position now is simply this. There is no power on earth that can prevent a severe slip in investment in the present economic situation, and such a slip has a double short-term effect. First, it will increase very severely the problems of unemployment. Second, it will hold back our capacity to expand when the time comes to expand.
I am advised—I base myself on an excellent article by Sam Brittan in the Financial Times—that before 20th July the Prime Minister was asked to include something about investment in his package but he thought it right to say "No". He is being pressed now by the C.B.I., and it was, to be fair, the theme of his own speech to the Productivity Conference.
I ask the Leader of the House to give us an assurance tonight. We tried to press the Chancellor on it, and it may well be that in this instance I am arguing the D.E.A. case, as it were, as against the Treasury; but that does not concern me. What does concern me is that there should be no general reflation and that we can be assured that it will be to investment and not to consumption that the Government will look when the time comes.
What is to happen after 1st January and after next August? The First Secretary of State told us something, though very little, of his thoughts on this matter. As I understand it, there are two groups of people whom he is considering with a tolerably favourable eye, first, those with whom genuine productivity agreements can be reached, and second, the lower-paid workers.
All I say about the first group is that they should never have been excluded even in what is technically called a time of standstill. It is madness to weaken this country by taking away from workers extra money which they have earned by

extra effort. That way lies madness for us even in the short run.
Second, what about the lower-paid workers after 1st January? This issue, of course, is one on which the House feels natural and instinctive sympathy, but we should also remember that it may not necessarily be right to accord to them the first priority. If productivity is the first priority, there may well be a conflict here, and it may conceivably be wrong to close the concertina of earnings even more instead of opening it to give incentives where one would wish to do so.
At the end of this period, Part IV will lapse, but it is our fear on this side of the House that, although Part IV will lapse, some equally unattractive bastard child may take its place. I could not help reflecting today, when the First Secretary said that it is not possible to have a prosecution before an offence, that we are getting very near it with these measures. After all, that is exactly what was achieved in "Alice in Wonderland"—sentence first and trial afterwards. I do not put it beyond this Administration.
The immediate question is whether the House will consent to bring in Part IV. It is wholly repugnant to the Tory Party. It is wholly repugnant to the Liberal Party. It is wholly offensive to everything the Labour Party stood for at the last election. I invite any Labour Member who wants to vote for the Motion tonight to think of his election address, the prospectus on which he obtained entry to this House. In the vast majority of cases, hon. Members will find that their twin pillars of faith were the National Plan and the appeal of the Prime Minister. It is hard to say which of those two has been more completely discredited by the events of the past few months.
I am not concerned with how other parties may vote or abstain. It is a reproach sometimes to us and sometimes to those below the Gangway opposite that they and we find ourselves in strange company. Such a reproach leaves me unmoved. [An HON. MEMBER: "But not in agreement."] That is precisely what I am coming to.
Our solution of incentives, trade union reform, reduced Government expenditure, intensified competition and choice in the social services not only are not Socialist solutions but are deeply repugnant to


many hon. Members opposite. Their remedies equally have no appeal to us. But on a free vote Part IV of this Act would not have any friends at all because, as the Prime Minister has said, in words which should be remembered, these are powers that no other Government even in war time have taken. It is an impertinent request from the Government that we should give them these powers and the House of Commons tonight, if it is to be true to itself, should deny, as it has always sought to deny, such powers as these to the Executive.

5.41 p.m.

Mr. Patrick Gordon Walker: The right hon. Member for Enfield, West (Mr. Iain Macleod) is the most formidable speaker on the Opposition Front Bench. I still mean it as a compliment when I say that the competition is not as great as all that. But I do not think that he made one of his most formidable speeches today. He jumped too much from one thing to another and I was very sorry that he did not choose to follow my right hon. Friend the Secretary of State for Economic Affairs into his penetrating analysis of the economic situation and the problems facing us, though I was interested to note that the right hon. Gentleman openly disagrees with the views of the right hon. Member for Wolverhampton, South-West (Mr. Powell) about the prices and incomes policy.
I agree with the right hon. Member for Enfield, West on the need to resist reflation by simply increasing consumer demand, but when he says that if there were a free vote on Part IV it would have no friends he is talking nonsense. As my right hon. Friend said, one of the striking features of the stern measures the Government have had to take, including the invocation of Part IV, is the degree to which they have evoked public understanding and support. There are, of course, many puzzled and worried people in the country and both sides of industry have doubts about compulsion, but there is a widespread feeling that compulsion is necessary in this brief period to which the Order applies in order to stop a small minority jumping the queue and cheating.
I think that the basic reason for the general understanding and support of what the Government are doing by this Order, and of the general policy which

forms the context of the Order, is that there is a broad recognition that the Government are accepting new responsibilities to avoid inflation.
It is necessary that these new responsibilities, the new powers that go with them and new attitudes shall be undertaken by the Government to match the responsibilities which everyone accepts belong to the Government for the maintenance of full employment, for unless the Government do act in the proper way—and this is being more and more understood—full employment, which we all want, is exactly the same thing as inflation.
Full employment is, after all, the use of the country's resources, human and material, at full stretch. The maintenance of full employment, if one does nothing else about it, is really trying to keep the economy at the top of a boom continuously, and if nothing is done there is an automatic tendency for increases in consumer purchasing power to outrun increases in production. That leads to the all-too-familiar sequence that goes on into a balance of payments crisis.
One thing we have learned—and I think that the right hon. Gentleman made it clear that he, too, has learned—from the Conservative Government's attempts to deal with this problem in their time is that it is not enough to turn on and off the tap of consumer demand. That simply perpetuates the sequence that leads on into a balance of payments crisis. It is true that, if one makes a sufficient cut in consumer purchasing power, one does in a certain sense solve the problem one is facing and goes from a balance of payments deficit into a balance of payments surplus. At great cost, one gets a surplus but at a lower level of general economic activity.
If, as the Conservatives always did, one tries to restart the economy by restimulating consumer purchasing power, one gets back into the whole cycle again and after two or three years one is back into a balance of payments crisis and so the whole thing goes on. It was the Conservative Government's idea that the way to control the situation and deal with the problem was to turn on and off the tap of consumer demand that was at the root of their stop-go policy.
The present Government have also had to cut consumer purchasing power at the


top of a boom which had gone too far, with the traditional and familiar results. There was no other way of achieving the sort of breathing space that we must have. But the essential point is that we must go into the next stage of economic advance by a different route from the old ill-starred Conservative way.
The decisive and essential step is that we should reactivate the economy this time by an export-led boom. That is absolutely essential. It counters the tendency, which arises if one does it by increasing consumer purchasing power again, for imports to rise and exports to sag. If a boom is started and led off by exports, then exports tend to keep up after the economy has got back to full activity and it is very much easier thereafter to sustain high exports as a permanent part of the general economic pattern. That has been the experience of Germany and other countries which have managed this.
I hope, therefore, that we will do everything internationally permissible to get exports going first. It is very important that investment grants should be especially speeded up for the major export industries. The I.R.C. should devote its first activities to exports. There are many ways in which one can stimulate exports to lead off the return to full economic activity.
But, to be frank—and here I agree with the right hon. Member for Enfield, West—the most effective way to give exports priority is not only to stimulate them but to hold other things back until exports have got ahead. One must maintain for the necessary time the general restraint upon the economy while one is stimulating the growth and development of exports.
An export-led boom will, of course, work itself through in due course to the creation of full demand in the economy. Wherever one starts up demand, it will work itself through. But if one does it with an export-led boom it works much more slowly than if one turns on the consumer purchasing power tap. That, of course, is why it is such a temptation to turn on the tap. On the other hand, if the Government delay too long in getting the export boom off, they will come under heavy and perhaps irresistible pressures to go back to the old way of

starting up consumer demand in order to get out of the situation. In my view, the Government should start now to launch the export-led boom.

Mr. Stanley R. McMaster: Would the right hon. Gentleman explain how exports are to be increased, how foreigners are to be persuaded to buy our goods, if prices of the goods increase because of increases in unit costs due to the lack of a home market?

Mr. Gordon Walker: There is little doubt that in a period of deflation as at the moment—and this is shown by the experience of other countries which have dealt with this situation—it is possible to lead with an export boom and that prices are not going up in such a situation, but, even without compulsory powers, are staying fairly steady.
This is one of the situations in which this can be managed. If we cannot manage to do it, I do not think that there is much hope, but I think that we can do it and I believe that if we start with an export-led boom now, the consequential working through the economy of increase in demand will just about be beginning to be effective by the time we are again in a balance of payments surplus.
The Government will be under great pressure to try the old easy way of turning on the old consumer demand tap, but they must hold firm. It is absolutely essential that next time we come out with a new pattern and rhythm of economic growth. We can achieve this if, on the basis of the things the Government have already done to make the prices and incomes policy effective and to ease the transfer of labour, and so on,—if, on this basis, we start off with exports as the way of regenerating demand in the economy.
I believe that that will at last give us what we have all wanted for so long, which is steady growth with stable prices. When this day comes—and I do not believe that it is as far away as some of the more gloomy prognostications of hon. Members opposite suggest—the overdriven and overdrawn criticisms which they have made will be forgotten and the hon. and right hon. Gentlemen who have made the criticisms will be the first to wish them to be forgotten. I think that it will be before very long and when


that day comes will be the full and complete justification of the standstill and this Order which forms an important part of the Government's standstill policy.

5.52 p.m.

Mr. John Boyd-Carpenter: In so far as he resisted the temptation to refer to the Order, I thought that the right hon. Member for Leyton (Mr. Gordon Walker) talked a great deal of sense. I fully share the views which he expressed about the importance of encouraging exports. Where I found some difficulty was in relating that argument to what the Government are actually doing, and doing under the Order.
The right hon. Gentleman will appreciate that it will be the effect of the Order—which he indicated he intended to support tonight—that export industries desperate for labour, will find it very difficult to raise their bids in order to attract it. It has been the policy of the Government to impose the Selective Employment Tax on those invisible exports which, as the right hon. Gentleman knows extremely well, are an important part of our export effort and contribute so much to our balance of payments.
Therefore, when the right hon. Gentleman talks, as he did, very sound economic sense, the House will find that the one gap in his admirable speech was that he did not relate it at all to the view that the Order should be supported. Indeed, he went almost the other way. He said that there needed to be some kind of thing like this to deal with the inflation created by full employment. We do not have full employment. Does the right hon. Gentleman think that we will have full employment by next August when the Order will, in any event, expire?
The right hon. Gentleman was really addressing himself to an unreal situation, a situation in which—he knows the City of Oxford well and I therefore give him this example—the local labour exchange is now sending letters to women's hairdressers suggesting that they provide opportunities of employment for displaced motor workers. In those circumstances, the right hon. Gentleman's speech seemed to be quite irrelevant to this issue.
The right hon. Gentleman under-rated enormously the complete change which has taken place in the Government's attitude. If, seven months ago, during the General Election campaign, any of my hon. or right hon. Friends had prophesied that on 5th October three peers and a distinguished Queen's Counsel—the right hon. and learned Gentleman the Attorney-General is here—would be flying to Balmoral to put into operation—perhaps in the circumstances I should say trying to put into operation—provisions to make it a criminal offence in certain circumstances for an employer to raise his employees' wages, would anybody have believed us? Would we not have been told in the word inevitably associated with my right hon. and learned Friend the Member for St. Marylebone (Mr. Hogg) that we were "bonkers"? Can the House visualise the indignation of the Prime Minister at yet another Tory smear?
Yet this is what happened within seven months of a Labour victory. Indeed, it was announced as an intention within less than four months of a Labour victory. Why, if this was to be done, were the electors not told? There are only two possible explanations. One is that the Government were so incompetent that they could not foresee, even a few months ahead, that a continuation of their policies would produce a situation in which they at least would think it necessary to do this. The other is that they did foresee it and concealed it from the electors and, in the case of the Prime Minister, went out of their way to deny it.
The House is left with those alternatives and it is no use the First Secretary blandly saying something about stopping people from jumping the queue. I repeat the words which my right hon. Friend quoted—these are steps which no democratic Government have ever taken even in time of war, and the right hon. Gentleman must do a great deal more to satisfy the House that it is necessary in these circumstances to take this extreme step.
I want particularly to emphasise the attack which the Order involves on the sanctity of contract. I asked the right hon. Gentleman a Question about this, as did some of my hon. Friends, last week, and he seemed to brush it aside. I put it to him again. We are here concerned


with cases—the right hon. Gentleman this afternoon mentioned that there were many of them—in which, by agreements freely entered into before 20th July, employers undertook to make increases after that date in the remuneration paid to their employees. In many cases those were contracts in return for good consideration—the abandonment of restrictive practices, increased productivity, and they were sometimes part of long-term agreements which it used to be the policy of the Ministry of Labour to encourage.
To come in as the Government have and to say to employers that, under the threat of criminal sanctions, they must not carry out the bargains which they willingly entered into is a very serious step to take. We are told that we are in a crisis of confidence. Surely that cannot but be made worse than by undermining the belief, as the philosopher Hobbes put it, that it is basic to society "that men abide their covenants made", or, as the Good Book puts it:
The man who promiseth his neighbour and disappointeth him not, even though it be to his own hindrance".
That is not only good morality, but good commercial sense and the old doctrine of the word of the Englishman was a considerable part of the reason for the country's great commercial prosperity in the last century. From his answers to questions, I do not think that the right hon. Gentleman has understood what damage he is doing to the clear doctrine that if one makes an agreement, one keeps it.
The last Government were trying, in the sphere of labour relations, to get longer-term agreements between unions and employers, with arrangements for increases in wages at different stages and with arrangements for conciliation and the avoidance of disputes. All of this kind of good healthy social progress, which hon. Members on both sides of the House welcomed at the time, is being placed in jeopardy if the Government come along and interfere in this way.
Look at the extraordinary anomalies which the Government are creating. Last Thursday the right hon. Gentleman, in answering a Question, said that it was all right to pay increases in pay after 20th July under a scheme for periodic increments but that it was all wrong to pay them after 20th July if a specific agreement

to make that payment had been made, equally before 20th July. I find it difficult to appreciate—and I am sure the people concerned will find it equally difficult—how this logical distinction can be maintained.
Then there was the reply in a Written Question by the Minister of Labour yesterday that eight wages councils Orders made before 20th July, were being put into operation to increase the remuneration of about 300,000 men. This is very good, but if that is so why is it that not only the award of the wages council but also the free agreement of employer and employee, as between the same dates, should not also be carried out?
I put the same point in respect of dividends. The Chancellor was asked at Question Time last week about the action of the Government in compelling Great Universal Stores to pay a dividend 4½ per cent. less than it had earlier stated it would pay.

Mr. Julius Silverman: Did the right hon. Gentleman say "compelling"?

Mr. Boyd-Carpenter: I used the word "compelling" and I shall justify it. I am very much obliged to the hon. Gentleman.
This statement about 36½ per cent. was made in good faith by this highly reputable company, and no doubt many people had bought its shares on that clear statement, made by responsible people. Now the Government come along and, I repeat, compel it to reduce its dividend by 4½ per cent. The Financial Secretary took the same point as the hon. Gentleman. He objected to the use of the word force. But when a Government, arming themselves with wide powers, or trying to arm themselves with these powers, represents this to a company and that company and everyone else knows that the Government have one way or the other the power to impose its will, I would suggest that the use of the word compel or force was fully justified.
If I held up the hon. Gentleman on our mutual way home and threatened him with a revolver, and if he hands over his wallet to me, he is still forced to do so even if I have not actually fired the revolver. Indeed, I am such a bad revolver shot that if I did fire it I would


probably diminish the effect of the threat. That is a fair analogy, because the First Secretary is an extremely bad shot with his Orders. This leads me to the extraordinary action of the right hon. Gentleman in respect of laundries and cleaners. The explanation of his conduct is perhaps to be found in the little rhyme:
First of all we set upon the weak,
Mainly because they do not squeak,
So loudly when they the".
The right hon. Gentleman thought that he would make an example and give the impression of strength and he has had, as he said, 300 letters. He acted with a speed which he, by implication, in his own speech admitted, was excessive, and a speed with which I understand he has pledged himself not to repeat.
That is what I meant when I said that the right hon. Gentleman was an extremely bad shot. We are doing a great deal of damage by undermining the belief in agreements. I think that it was unnecessary to invest the Government with these compulsory powers, but if the House disagrees with me, and takes the view that we should have them, then I suggest that it should be done on the basis that it would save existing agreements. Take the situation which the Government are creating in the Thorn case. There, the courts have found that the union concerned had a legally enforceable right to this increase. As my right hon. Friend said, it will have it, but only for the period up to 6th October. Let the House note what is following 6th October. The Government are proposing to take away what the courts have said is a legal right of that union and its members, without compensation.
It is surely an accepted principle of Government action that if, in the common interest, one takes away the rights of an individual by public action one compensates him. I do not see why that salutary principle should not be applied, because the organisation concerned happens to be a trade union. I do not know whether this is the new doctrine of the Government. It is an indication of the mess that they have got themselves into.
This proposal solves nothing. We are to have this element of compulsion until next August, during a period in which the economic conditions which the Government have created will make it

extremely unlikely that in any event many employers would make future agreements for wage increases, although I believe that all decent employers would keep the bargains that they made if they were free to do so.
What happens at the end of that time? Has the right hon. Gentleman really thought this out? His speech did not suggest that he had. Does the right hon. Gentleman recollect that when one imposes restrictions of this sort one produces a very sharp reaction once they are removed? The House will remember what happened when, years ago, sweet rationing was abolished. All the calculations of the Government were upset by an immense rush resulting from the removal of control. How are the Government, if they are still there next August, to prevent this? When the right hon. Gentleman replies will he give us an undertaking that there will be no legislation proposed between now and August to continue these compulsory powers beyond next August? Unless the right hon. Gentleman can say that many of us will remember the French saying: "Rien dure comme la provisoire". I translate that as saying that the Liberal Party still seems to go on.

Mr. Emlyn Hooson: It is bad French.

Mr. Boyd-Carpenter: It is remarkably good French, but I cannot expect the hon. and learned Gentleman to understand it.
Is this really temporary? Are the Government to come along, probably towards the end of July, when hon. Members opposite are thinking of their grouse moors, and bring forward a further Bill to extend this? Can we have a plain reassurance that this will not be done?
To sum up, there has been a tremendous change in this Government's policy, and in their conduct of our affairs reflected in the introduction of this Order. The House will recollect, and I am sure that people outside are convinced, that it has been a most tremendous change and surrender. That this Government should consider the state of this country under their own rule, after two years, to be such that they thought it right, rightly or wrongly, to take these drastic steps is one of the most remarkable things that has ever happened.
Let me recall certain words upon this subject:
This Conference condemns the Government's high-handed decision to overturn freely negotiated wage agreements and arbitration awards. It calls upon the Government forthwith to reverse its present policy in the matter before all confidence in the effectiveness and fairness of wage fixing machinery is destroyed".
Those words were spoken at the Labour Party conference in 1961 as part of a Motion moved by the present Chancellor of the Exchequer. Therefore, it is an indication either that these measures are a complete reversal of policy or that the state of this country, as a result of two years of Labour rule, is disastrously bad.
I conclude with a few lines which sum up what most of us think about this discredited Government:
Five years ago, and we might have feared them
Been drubbed by the coward, and taught by the dunce;
Truth may endure, and be told and re-echoed,
But a lie can never be young but once.
Five years ago and we might have feared them.
Now when they lift the laurelled brow
There shall naught go up from our host assembled.
But a laugh like thunder.
We know them now".

6.11 p.m.

Mr. Julius Silverman: I wish to express the doubts and reservations of many of my hon. Friends and myself about this Order. They are different in character from those put forward by the Opposition.
Together with a large number of my colleagues, I supported, with some doubts and reservations, the Prices and Incomes Act, and, therefore, the inclusion of Part IV, on the basis that the sacrifices which it demanded would be fairly borne by all sections of the community and that the restrictions would apply to prices and dividends in precisely the same way as they applied to wages.
We have had the chance to witness the Government's policy in operation for three months since the passing of the Act. It is said that Part IV deals with prices and incomes. It does not. It deals with prices and wages. There is no power in it to deal with dividends. The right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) talked about the

threatened use of the revolver. There is no revolver. There is no power in Part IV to deal with dividends. That is my first objection to it.
While it may be true, as the right hon. Member said, that a large number of dividends have not been increased, what does that mean in practice? It means that if the profits are there, they are merely carried over until the freeze ends. Therefore, there would simply be a delay in distribution. This is quite different from the position of the worker or wage earner who forfeits his increase, not merely for the period of the freeze, but for all time.
I should like to ask the Minister to tell us why this power to deal with dividends has been forfeited. Why was it sunk? Why has it disappeared without trace? We are entitled to know the answer to this question. Also, it is not good enough to say that many firms have been co-operative, because if we deal with unco-operative trade unions why should we not deal at the same time with the unco-operative firm which pays its dividend?
Let me deal with the question of prices. This is called a prices and incomes policy. My objection is precisely opposite to that of the right hon. Gentleman. Nothing was done about prices until Order No. 1322 was introduced at the end of last week, in the shadow of this debate. The mechanism was not created, as it would have to be created, to deal with prices. Nor is there as yet any evidence that the Government have worked out or thought out that mechanism or that they are giving consideration to it. I should like to hear from the Minister what mechanism the Government are thinking of and what they are doing to create a mechanism dealing with prices.
We have been told by the Government that there has been no significant increase in prices since 20th July. I am sorry to argue with the statistics of the Index of Retail Prices, but I am bound to say that if one spoke to 100 housewives in my area one would not find many who would accept what is said in the index as an objective statement of fact. There have been a large number of increases. Indeed, I think that the Minister said that of the prices which have been investigated most were justified. What about those which were not


justified? May we hear about them? What investigations has the Minister made about them and what are the Government doing about them? The only action which we have had at this late stage is Order No. 1332 dealing with laundries.
I have described it before, and I describe it again, as a document which is not worth the paper that it is printed on. As far as I know, practically every laundry has already put up its prices 5 per cent., 6 per cent. and, in some cases, as the Minister said, 10 per cent. All that the Order does is to close the stable door after the horses have gone.

Mr. F. A. Burden: Is the hon. Gentleman aware that some railway hotels have increased their price for lunch by as much as 2s., putting the increase down to the Selective Employment Tax, and that the Minister of Transport justifies it in the light of the increase in taxation?

Mr. Silverman: I do not see the point of that intervention. It may or may not be true. It may be that these increases are justified; I do not know. All that I am saying is that the Order is valueless. This Order, the only Order which has been made as a method of dealing with price increases, is meaningless.
If it is true, as the Minister says, that there are still more horses in the stable—I do not know of any—and that there are some firms which have not increased their prices and have endeavoured to absorb the Selective Employment Tax, it seems somewhat unfair to the few who have endeavoured to co-operate with the Ministry that they should be the only ones subject to this Order.
The Minister says that it is still open to him to introduce an Order under Section 27 of the Prices and Incomes Act. There is no reason why he should not have done so already, because Section 27 provides for representations. The delay does not matter, because if he finds that he is justified in bringing a price down he can bring it down to what it was or what he thinks appropriate relating to the prices of 20th July. Therefore, to say that he might yet do something under Section 27 is no argument.
Let me deal with wages. It has been said that the freeze is voluntary. But it

is not a voluntary freeze for the workers. The Government have given the green light to employers to maintain the present level of workers' wages.

Sir Douglas Glover: It has not given them the green light. It has ordered them to.

Mr. Silverman: It has not, because so far they have not been compelled to do this by any Order. In their excess of patriotism, the employers have cooperated. Out of their bursting desire to co-operate with the Government, they have been quite willing to keep down the level of wages of their workers. Could patriotism go any further than that? Therefore, to call this a voluntary freeze is quite wrong. It is not a voluntary freeze.
The point is that this freeze already applies to only about 99 per cent. of the workers. What we are talking about today is the small fraction of workers who had contracts operative before 20th July. To make the freeze effective, does the Minister think it necessary to draw the line so as to break these contracts? It is a question of where one draws the line, and it is just as rational to draw it to exclude this small fraction of workers who had contracts in operation before the freeze began.
I believe that the majority of people support the standstill. Most people to whom I have spoken agree with it provided that it is fair. I have dealt with the question of fairness. At the same time, the workers concerned will bitterly resent the fact that contracts which they have freely negotiated and entered into are taken away from them by the Government.
Let me deal, for instance, with a particular case—the proposed Order in relation to Thorn Electrical Industries. We are dealing here with supervisors, men of experience and skill. Their wage before the increase was negotiated was £20. The agreement increased it to £21, an increase of 5 per cent. While it is true that they are not among the lowest-paid workers, will anybody tell me that to pay a worker of that experience and skill £21 is excessive and unfair and that workers demanding their rights in this respect are being selfish? I cannot see that at all.

Mr. Alexander W. Lyon: If the norm for the incomes policy over the past year or so has been 3 per cent. because the increase in productivity was 3 per cent., is it not unreasonable for one section of workers, however deserving, to ask for 5 per cent.?

Mr. Silverman: My hon. Friend misconceives the position. We are not dealing now with any norm or with productivity. We now have a freeze, which is quite different from a wages policy. The House must understand that in a freeze all the existing serious anomalies of the wage structure are perpetuated. They are not modified. It is not a wage policy at all. The lower-paid workers continue to get no more. The people who have done rather well out of the "rat race" for labour continue to get highly paid.
We are not talking now about norms, a wage policy or productivity. This is a wage freeze. A large number of people accept it, not because it is related to a wage policy, but simply because it is a desperate measure to deal with a desperate economic situation. They are prepared to make sacrifices for their country because of the country's difficult situation.
I have given an example of skilled workers. There was one thing which stood out like a sore thumb in yesterday's debate. One of the greatest difficulties in our economy today, and one of the greatest faults in the structure of our labour force, is the shortage of skilled men. That emerged clearly yesterday. The skilled men who are declared redundant can easily be redeployed. There are jobs for them.
The trouble today—and this is a difficulty which has arisen over many years—is that we have a much too great base and substructure of unskilled and semiskilled men and a deficient superstructure of skilled men. That is not because of inadequate provision for training or technological education, although that might be one of the points. The main point is that in this country the skilled man does not receive an adequate reward for his labour and for his responsibility. [An HON. MEMBER: "Hear, hear."] It is all very well for an hon. Member opposite to say "Hear, hear", but this happened under 13 years of Tory rule.
Therefore, in thinking in terms of any wage policy, it is not merely the lowest-paid workers who must be thought of, although that might make social sense and it might help the Government to sell the freeze as an economic policy. The remuneration of the skilled worker is a matter which should be urgently considered. It is economic nonsense when one hears of skilled men leaving their skilled jobs to do unskilled work because they get higher pay for it. Therefore, I ask the Minister, as a matter of economic sense, to look again at the Orders which have been made under Section 29 concerning both Thorn Electrical and the others.
It is all very well describing these men as selfish or attacking Mr. Clive Jenkins and the others. These men have banded together in A.S.S.E.T. which is an increasing union, simply because of the feeling that they are not adequately paid. The consequence is that this is a union of increasing strength and influence. In my view, it serves an important function. Mr. Clive Jenkins' view of the economic situation may in some respects be right, and that of the Government in this regard may be wrong, because I am sure that the pressure for higher wages for the skilled worker is as important a matter to the economy as it is to the workers themselves.
I have an interest to declare. I am a member of A.S.S.E.T. So, also, is the Prime Minister. The Minister of Land and Natural Resources, the First Secretary to the Treasury and many other Ministers, as well as other hon. Members, are members of what I think is an excellent union. I will remind the House of something else. All those members of A.S.S.E.T., together with other Members of Parliament, received an increase in December, 1964. At that time, we were in the middle of a crisis, and the increase was not 5 per cent. but 85 per cent. I believe that it was justified, but, having done that, it ill befits any hon. Member to talk with unctious self-righteousness about a selfish minority.
I believe that there are many holes to be filled in this wages and prices policy, many of them more serious to the nation's sense of fairness than the matters contained in the two Orders of which the right hon. Gentleman has given notice.
I will mention one big hole in the City of Birmingham. The Tory city council, bursting with patriotism in its desire to assist the Government, has imposed the freeze on all its employees. There again one sees Tory patriotism; they will assist the Government, whatever it is. But when my right hon. Friend the then Minister of Housing and Local Government suggested that the substantial increases in rent which it was proposed to impose should also be frozen, the city council said, "Oh, no. We do not do that. We will impose the wage freeze, but when it comes to an increase in municipal rents our tenants will have to pay that." There are thousands of cases in Birmingham where a man who is a council tenant has had his wages frozen, in some cases in spite of a contract—and the Birmingham City Council has not worried about contracts—and, at the same time, he is having to face an increase of 11s. to 13s. a week on his rent.
I believe that that is a fraudulent use of the wage freeze, and I want to know what the Minister intends to do about it. It is a hole which has to be filled, and it is felt much more acutely by a man in that position than other workers will feel the implications of a contract with Thorn Electrical or other contracts of that sort. I ask the Minister to look at these matters, and I say again that I hope that he will look at the Orders. If he intends to make the price standstill effective he will have to impose it throughout the whole of its breadth, and not merely as it affects wages. He has the opportunity to reconsider, after representations, the Orders which he proposes to make under Section 29. I hope that he will do so.

6.34 p.m.

Sir Derek Walker-Smith: The House always listens with sympathy and attention to hon. Members who find it necessary to criticise the actions, or to differ from the actions, of the Government which they support or of the party of which they are members. The House does that for the good reason that hon. Members do not take that approach unless they have given careful, individual and personal consideration to the issues involved.
On this occasion, at any rate, I cannot claim that indulgence for the attention

of the House because I speak in the agreeable aroma of orthodoxy. But I would assure the House, nevertheless, that I have given the problem serious, careful and personal consideration over a good many years. A little later, I shall make some observations about a number of the wider problems. I want first, however, to refer for a moment to the background which brings us to Part IV and say something about the content and operation of Part IV. After that I shall say a word about the future which the Secretary of State invites us, sombrely but characteristically, to envisage in terms of severe restraint.
If it was not for the violation done to the sanctity of contract by these measures and their compulsive element, it could be claimed that what the Government are doing was part of the established pattern of the post-war inflationary age. That pattern comprises a long period of passive acquiescence by Governments in inflation followed by a sharp period of hasty reaction and deflation, the steeper the inflationary curve the harsher being the corrective measures. All post-war Governments have shared in that tendency, to some extent, although it has been noticeable in Labour Governments particularly.
The Secretary of State borrowed from ancient history to illustrate his speech. If I may adapt the words of the first Book of Kings in this context, whereas Conservative Ministers on these occasions chastised with whips, the Secretary of State and his predecessor are, in Part IV, chastising with scorpions, and the little finger of the right hon. Gentleman opposite is thicker than the loins of my right hon. Friends. I am sorry that my hon. Friend the hon. Member for Finchley (Mrs. Thatcher) should catch my eye at that moment, because it makes it a less apposite, although scriptural, analogy than otherwise it might be.
Obviously the corrective measures are harsher under a Labour Government. That is natural. Inflation is a built-in consequence of Labour economic policies; and the harshness of corrective measures, in that they involve a regimentation of the economy, is not alien to the political philosophy of Socialism.
What the Government are doing is to try to reproduce the well-known circus trick of seeking to jump from the back of


a horse galloping in one direction on to that of a horse galloping in the opposite direction. There is, however, the difference in this case, that circus horses are very well trained and their riders are expert in their job, whereas here it is obvious that the inflationary horse was running amuck, and all the signs and portents are that the deflationary horse will give the Government a very rough ride.
By activating Part IV, the Government have opted for compulsion, and they have opted for violating the sanctity of contract. They have done it in an unsatisfactory, inappropriate and question-begging form. As we know, Part IV has two methods of approach. The first is the method of the specific Order applied to specified industries and undertakings, whether by a Section 28 Order limiting remuneration to that paid at the date of the Order or by a Section 29 Order limiting remuneration to what was paid on 20th July. Corresponding provisions for prices are found in Sections 26 and 27, and there are penal sanctions attached. That means that the specific Order approach, though harsh and coercive, is at any rate clear cut.
We are not activating specific Orders today. We are activating Part IV. This brings into operation the second and general provision, Section 30. That Section does not make contracts to pay increased remuneration illegal. It contains no penal sanction. It is not illegal for an employer to pay increased wages because of Section 30. The Section does not compel an employer not to honour his contract. It does not make the contract illegal. If it did, the doctrine of frustration would come into effect and the contract would cease to exist. It is a very well known application of the legal doctrine of frustration of a contract that it has been rendered impossible by Act of Parliament. But Part IV does not in general frustrate the contract to pay higher wages. All that it does under Section 30 is to give a statutory exemption from liability to the employer if he chooses to avail himself of it.
Consider the position if an employer chooses not to honour his contract because the Government have said that they want him not to. The position in law is that, under Part IV of the Act, the contract to pay the higher remuneration remains. The breach of the contract,

if the employer does not pay it, remains. The damage that flows from the breach of the contract remains. All that goes under Section 30 is the liability on the employer to pay those damages if he seeks to avail himself of the machinery of subsection (2) of that Section.
Over the page one finds coyly tucked away subsection (3) which says:
Subsection (2) above shall not take away the employee's right to rescind the contract".
His right to rescind the contract arises because subsection (2) invites the employer to breach the contract. The Act does not take away the employees' right to rescind. He still has that; but it is a rather cynical subsection to write in. The Government know that his right to rescind will be exercised only if he thinks that it is easy to get employment, or better employment, elsewhere; and as at the same time the policy of the Government is to step up unemployment, the right to rescind is a mere paper right which is left to him.
All that Section 30 does is to give a statutory defence to the employer if he chooses to avail himself of it. It does not make the contract illegal. In other words, it passes the buck to the employer. The hallmark of good administration is to accept the buck. Hon. Members will perhaps recall the notice which was said to be in President Truman's office—"The buck stops here". But not with this Government. Not content with practising gamesmanship, they are going in for buckmanship as well.
There are many statutory defences known to the law of which employers can avail themselves if they choose—the Limitation Act, the Gaming Acts, and so on. There are statutory defences of varying respectability. Some are known to be statutory defences of which gentlemen are not expected to avail themselves. Here we have another statutory defence offered to the employers if they choose to avail themselves of it. Of course their choice may be assisted by seeing the Government in the background with a Section 29 Order up their sleeves. Hon. Members will make their own assessment as to whether that makes this statutory defence more respectable or not. I say that they pass an invidious choice to the employer in doing that.
If the Government had the courage of their convictions, they could prohibit by


law the payment of increased wages, even though a contract exists. It would be a harsh and coercive thing to do; but at least the position would be clear. No employer could then pay increased remuneration, because he would be prevented by law from doing so. But at least he would not be forced to dishonour his contract, because the contract, being frustrated in law, would cease to exist.
I suggest that if the Government really feel that after two years of Labour administration the economic situation is such that it can be remedied only by the application of the iron hand of compulsion, they should assume the responsibility themselves and ask Parliament to legislate to frustrate those contracts. They should impose their policy, as Governments always should, by the operation of law, and the operation of law alone.
I want to pass for a moment to the future aspect of the matter. I believe that Part IV will rank as a very unhappy chapter in the tangled and unsatisfactory history of post-war wages and incomes policy. There are, in principle, three methods of exercising wages or incomes control—regulation by the operation of the market, regulation by law, and attempted regulation by Government exhortation. I say "attempted regulation" because it never works very well. Many ears will be deaf to the siren voices of Government exhorters, even if they sound more sweetly in the ear than those of the First Secretary and his predecessor.
I believe that in this country we have a pattern of wages which is a muddled, and often contradictory and self-defeating mixture of these three elements. The wages of the more prosperous and better-organised industries are fixed by uninhibited collective bargaining reflecting the operation of the market. The wages of the smaller, less well organised, and less well paid industries are fixed by a measure of State intervention under the Wages Council Act of 1959. There is a third category, which is not industrial at all, all those people doing socially useful, but not directly productive, work. Their remuneration is governed mainly by State regulation, tempered only by such pressures as they can bring to bear. They are in a weak bargaining position, partly because they cannot point to any

increase in production to justify the increased remuneration, and partly because so many of them have a near-monopolistic employer in the State—doctors, nurses, teachers, the police, and so on. I believe that there is no effective inter-relation between these elements and no coherent pattern. This leads to a position of considerable illogicality, and—worse—to injustice and discontent.
I think that the House has to ask itself for the future how long we can continue with the seeming paradox of a form of free bargaining for certain industrial wage earners, and State regulation for others. I believe that three things need urgent attention. The first action is obvious—that is the elimination of restrictive practices, which will lead to an increase in the gross national product, and thereby enable more to be available to be shared by all. The other two, at the moment, are matters for inquiry and consideration. We must consider whether we can really expect arbitrators and the Industrial Courts to function without criteria, which is something that no judge will ever seek to do. And if we conclude that they cannot function without criteria, we should consider whether we can formulate the criteria.
Lastly, we must consider whether, in the so-called affluent society, people should not be able to contribute more as individuals to the support of the social services so as to enable better remuneration to be paid to those whose work supports those social services. I believe that these are constructive steps, more constructive than the mere proclamation of a future seen in terms of severe restraint.
To my mind the words "severe restraint" strike an arid, unsympathetic, unimaginative and unstatesmanlike note. Severe restraint is no doubt a virtue, but at best it is a very negative virtue; and we need more than such a cold and passive virtue if we are to improve the standard of living of our people in a keenly competitive world. We need more positive things. We need incentive and energy and dynamism and a more logical and equitable pattern in our wages and incomes system.
What we need today and for the future is a new, objective, informed assessment of these problems against the economic


and social realities of our time. Instead of that, we are fobbed off with expedients—expedients of varying degrees of harshness, irrelevance, superficiality and panic motivation. As long as the Government, the House and the country are content with expedients such as that, there neither will be nor can be a solution to these great problems.

6.51 p.m.

Mr. Charles Pannell: I am glad to follow the right hon. and learned Member for Hertfordshire, East (Sir D. Walker-Smith) in his dissertation, although it was largely in the law, with which I am not familiar. At least I can match him in the fact that I have had considerable experience over a great many years in the practice of wage negotiations.
But on the fundamental point, surely we cannot levy against the Government his charge that they are passing the buck here. On 3rd August I was the only one, certainly from this side of the House, who made the point that we should immediately have brought in the affirmative Order with the legislation. I thought that up to this day the buck has been left in another place and that under the voluntary system a very heavy burden has been placed on the trade unionists of this country—and I mean the trade union leaders, the people who have to act in an executive capacity.
It is admitted that in probably 90 per cent. of cases a voluntary freeze, a voluntary halt, has been accepted throughout the trade union movement up and down the country. What we are considering today is the 3 per cent., the difficult customers who are not prepared to see it that way. Where we have this awkward minority it places people in my union, the Amalgamated Engineering Union, in a very difficult position.
Let us consider the difference between my union and A.S.S.E.T., of which my hon. Friend the Member for Birmingham, Aston (Mr. Julius Silverman) is a member. We can have a position in which both unions negotiate with the same sort of people. Very often the membership overlaps. Indeed, for all I know, there are members who are members of both organisations. But we could have Sir William Carron observing the freeze: and Mr. Clive Jenkins deciding

that he will not observe it. Bearing in mind that A.S.S.E.T. has about 44,000 members and that my union has over 1 million members, it will be seen that this creates a position of great difficulty in the trade union movement.
Another difficulty arises between the public and the private sectors. The right hon. and learned Member will recall his difficulty about the nurses when he was Minister of Health. I am not making this a personal point. Of course he took collective responsibility with others on that occasion. But he knows the difficulty. It is possible for a Minister of Health to stop an advance in salary for nurses. It is possible right through the public sector for the Minister by arbitrary action to say to the public sector, "You will not have an increase in pay because it is Government policy that you should not have one".
That is not the situation in the private sector. Let us at least define the terms that we are discussing. We are not arguing about the public sector, where the chopper can come down in any event. We are not arguing about 97 per cent. of the private sector, who have seen the sense of the Government's policy. We are arguing about a minority which, frankly, we consider to be anti-social.

Sir D. Walker-Smith: I merely want to set the record right, as a matter of history. The case to which the right hon. Gentleman refers was the case of the administrative and clerical workers in the Health Service. I am glad to say that in the three years that I was Minister of Health the nurses had several increases in pay. But on the general point, I entirely accept that in my three years at the Ministry of Health I became very conscious of this problem of what I called workers who were doing socially useful but not directly productive work.

Mr. Pannell: I stand corrected on detail, but I think that the right hon. and learned Gentleman accepts the principle of what I said.
I said on 3rd August that in many cases executive councils have no constitutional power to volunteer to breach agreements. In the public sector all that is likely to be voluntary is that the Government will volunteer to refuse to pay the money. That is the difficulty, and it was the burden of my speech. I think that the


Government should take the responsibility that belongs only to the Government. I am not now arguing the broad policy, but if the Government consider that the needs of the policy are overriding, then they must have the courage to deal with the situation rather than lay the responsibility on the individual trade union members. Anybody reading the report of the Labour Party conference knows of those who spoke about the extreme difficulties which this involves. I merely reiterate the point which I made previously.
I wish to go on to a point made in the latter part of the speech of the right hon. Member for Enfield, West (Mr. Iain Macleod)—that which gave me most interest—concerning the question of unemployment. The odd thing about this debate is that whereas the matter of today's debate could have been out of order yesterday, the matter of yesterday's debate is in order today. In effect, we cannot consider this Order unless we do so in the broader context of full employment. I do not wish to make this a party issue, except to make it plain as part of my basic thinking: I am old enough to have lived through unemployment, and the sort of person I am and the views which I hold are largely conditioned by the problems of unemployment.
If we take the 17 years of Conservative government, I remember that in the inter-war years there were never fewer than 1,700,000 unemployed which, with their wives and families, meant that about 6 million people were always on the poverty line. I have always felt that if I stood for anything in public life it would be for resisting any idea that mass unemployment should be endemic in our social system. That goes to the very core of my being.
I was troubled and very dismayed by something which the Minister of Labour said yesterday. It is reported at column 673. He said:
I should like to refer to the remark of my right hon. Friend the Prime Minister, which has been variously interpreted, when he referred to the future level of unemployment and suggested that 2 per cent. might be an acceptable limit".
That is not an acceptable limit to me. He continued:
I would point out that the Prime Minister was here referring to the unemployment level

after redeployment had taken effect; he was not referring to the winter peak of unemployment in January or February of 1967. Hon. Gentlemen should read the facts."—[OFFICIAL REPORT, 24th October, 1966; Vol. 734, c. 673.]
I do not want to read the facts. I had the awful message years ago. With respect to my right hon. Friend the Minister of Labour, I was not reared in the protective employment of the railways where railwaymen put up with low wages in return for security. I received my apprenticeship in the full blast of foreign competition.
I do not accept that figure at all, and I hope that nobody on this side of the House accepts it. I can remember reading the White Paper of 1944. There was quite a moving story about Ernest Bevin and Winston Churchill seeing the troops off to the front. They called out, "What are you going to bring us back to, Ernie? The dole?" They did not ask the question of Winston. They looked naturally to the great Minister of Labour. If there was one thing which returned the Labour Government in 1945, it was a fear of hon. Gentlemen on the Tory benches and all that they did in the 1930s. Make no mistake about that. I do not want to make a lot of old wrongs, particularly since the figures of unemployment since the war have been reasonably the same under Governments of both parties.
I thought that the right hon. Member for Enfield, West said a rather silly thing when he said he hoped that voices would be raised against any early reflation. That is really a contradiction in terms. I have had some Ministerial experience. I know that the task of running down an industry is not an easy one. The trouble is that when one introduces controls for, say, the building industry, it probably takes nine months for the Minister's decision to have effect and for men to be laid off. However, it takes the same sort of time, possibly longer, to build up again. So, in effect, taking a hypothetical case, if it takes an industry nine months to run down, one must start reflating it after three months from the original time.
In other words, the lines must cross each other, otherwise we run into the sort of position about which the Minister of Labour was speaking, when we get down to a low in January or February, with a downward spiral, investment is repelled from the industry and deflation gets out of control. That is the curious


thing about it. One cannot aim at a certain level of unemployment because it is completely unpredictable. It is time that we reminded some people, including those in the Treasury and the Ministry of Labour, that economics is not yet an exact science. The prognostications of these people are not to be trusted any more than leader writers in The Times are to be trusted.
The important point to remember was made in his opening remarks by the right hon. Member for Leeds, North-East (Sir K. Joseph) yesterday; that for the man unemployed it means 100 per cent. unemployment. Do not let us talk any more in terms of statistics.
I go with Government policy and I recognise that there must be a shake-out in industry. This may be heterodoxy to some people in Birmingham, but I believe that the motor car industry is too big in the context of the nation's economy and that many men trained in skills are doing jobs which are below the contribution they could make to the country.
I do not wish to impose on my hon. Friends by speaking at length. I shall go into the Lobby with the greatest confidence tonight to vote for Part IV because I have for long believed that it is a trifle "phoney" to speak in terms of a voluntary freeze. It is not a voluntary freeze when all the pressures of the State are on the trade unions. The State must take its own responsibility and it is in that sense that I will be voting tonight.
However, I beg my right hon. Friends not to push too far the loyalty of people who have been loyal to the Labour Movement for 45 years and not to talk in a slipshod way about unemployment. I ask them to believe that it might have been them who were affected. One cannot be objective about unemployment when it happens to be oneself who is unemployed. Consequently, let us get back to the idea of the knowledge that inflation is that happy condition in society when there are more jobs than there are men, remembering that deflation is that unhappy condition in society when there are more men than jobs.
Because of the experience I have had during all the years I have known, I know for what I opt. It is because I believe that the Order serves those ends that I will vote for the Government tonight.

7.4 p.m.

Sir John Vaughan-Morgan: I hope that the right hon. Member for Leeds, West (Mr. C. Pannell) will forgive me if I do not argue with him on this occasion, because I wish my contribution to be brief.
I have a special reason for taking part in this debate since I am a director of a company which found itself unable to comply with the request of the Minister to defer a wage increase. To that extent, I suppose that we have, as a company, some responsibility for the voluntary element being removed from this and compulsion imposed. I agree with the right hon. Member for Leeds, West. The voluntary situation placed an intolerable burden on the trade unions, but also on employers. I wish that he would remember that as well, because it has a great bearing on the case I wish to cite.
The circumstances of our case, briefly, are that we entered into a productivity agreement last March—an agreement of the kind that we thought would be approved of by the Government. It was urged on us in the National Plan, if it is not bad taste to refer to that rather dusty tome which has so soon been "remaindered by the publishers". Part of the wage increase involved was backdated to February; the rest was deferred until October of this year. The idea in the agreement was that the bulk of the award should not be implemented until it was seen that the agreement had been carried out on the workers side. The agreement dealt with usual matters of demarcation and got rid of a number of minor as well as some major restrictive practices.
In September, it was perfectly clear that the agreement had been fully and honourably implemented by the employees. However, in view of the White Paper of July, the Ministry was approached and asked for its guidance and approval, bearing in mind that the White Paper of July exempted
… increases in pay resulting directly from increased output …
and went on to list the conditions. We felt that our agreement complied fully with the spirit of the White Paper.
As a firm, we sought guidance from the C.B.I. and that oracle proved very


delphic, even to the point of being extremely woolly indeed. But the Ministry, even after discussions in which both management and unions took part, held that the wage rise must be held over until April and that the ensuing savings must be retained by the company—this in a year when as far as we can see there will be no marked decline in profitability, since we are an exporting concern. There should not be such a decline since 50 per cent. of our profits come from exports.
When we took the decision to implement our wage agreement we were not, I need hardly say, influenced by any political consideration. Indeed, the only attempt to play politics with our decision was when a constituent of mine—not, I need add a Conservative—arraigned me in a local newspaper. To judge from the reactions of some of my opponents, his action was a little unwise. Nor was our decision influenced by the Thorn case since that decision was given on the very day of our board meeting. Quite frankly, as a board we felt far too strongly that we should not be asked to break faith. That is the simple English for what we decided.
The minute of the board reads as follows:
… at a Board meeting of this Company concluded yesterday morning"—
this is in a letter to the Minister—
the sanctity of a legal and contractual agreement was most carefully weighed against your request that we voluntarily forbear from honouring our part, despite full and satisfactory completion of their part of the contract by the employees; and the Board found itself unable to accept your request to repudiate voluntarily an agreement freely negotiated. To do so would be illegal and make the achievement of any similar productivity bargain in the future a matter of great difficulty".
That, surely, is the whole point of the matter—one small action like that could jeopardise good relations with employees.
Here, perhaps I might in parenthesis say that we have had remarkably good relations for 110 years. The right hon. Gentleman the Member for Battersea, North (Mr. Jay) was here a little while ago; I think that were he here now he would give us a good reference. The hon. Member for Battersea, South (Mr. Perry)—and I gave him notice that I would mention this—referred to this firm in his maiden speech. He said that it

was a wonderful firm and had a tradition in export and production. One does not earn that kind of reputation by breaking one's contracts. We thought that it was a dishonourable course to take.
We are now in the curious position of not knowing whether or not the Minister will issue an Order concerning our case. So far, our light has been hidden under something of a bushel—or, perhaps, something of a thorn. We do not know what he will do. If the Minister takes no action, all his efforts to persuade us are made a nonsense of forthwith. If he makes an Order we shall, I suppose, comply, because there is an element of force majeure. But I still think that before he does so he must realise that he is forcing an employer to do his dirty work for him.
There is this difference between the public and the private sector, and the right hon. Member for Leeds, West referred to it. When a Minister of Health interferes with an agreement, he is not employing an agent. He takes the odium and the responsibility, and he is answerable to this House. He is not sheltering behind another employer—and one who, incidentally, can be taken to court.
So there we are. We await his decision. The Minister will probably say that it is all very difficult to make an exception. He may even say something rather trite, like "Hard cases made bad law", but he should remember the corollary, which is that bad laws make hard cases. That is what is happening as a result of this particular very bad law.
I do not believe that the law as it stands makes any real contribution to our economic difficulties at all. We shall survive our economic difficulties, and shall, I think, emerge from the crisis sooner than some of my pessimistic right hon. Friends think, but the survival will not be due in any way to this Act but to the other measures which the Government have belatedly taken. The tragedy is that the harshness of the measures which the Government have taken is due to the fact that for so long they have believed in the mumbo-jumbo of such Acts as this.

7.15 p.m.

Mr. Jack Ashley: One of the more agreeable diversions when listening to this debate is to watch the performance of the right hon.


Member for Enfield, West (Mr. Iain Macleod) as he jests his way through an attack upon the Government, as he did at the beginning of this debate. I was intrigued to watch him attempting to pin labels on both sides of the House. He attempted to pin the label of compulsion on this side of the House and that of freedom on that side. It rather reminded me of the Conservatives at their party conference, when it was decided to pin the label of patriotism upon the Conservative Party by draping the platform with the Union Jack. Then they got one of the organists to play "Land of Hope and Glory"——

Sir D. Glover: Better than "The Red Flag".

Mr. Ashley: —while the other organist made a theatrical entrance on to the platform.
When the right hon. Member for Enfield, West speaks on Part IV he should be clear of one thing, and that is that the issue before the House tonight is not the issue of regulation or compulsion. There is always regulation of some kind. The real issue before us is regulation by savage and indiscriminate market forces or, alternatively, regulation by a Government concerned with social justice. I do not want the right hon. Gentleman to misunderstand me. I enjoy listening to him—I always enjoy listening to him. I also enjoy listening to Ken Dodd and Steptoe and Tony Hancock. The fact is that all these people are good, but none of them is as good as the right hon. Gentleman when he transforms a serious political debate into a Parliamentary pantomime.
I do not mind hon. Members opposite attempting to make party political capital out of Part IV or of the productivity, prices and incomes policy. I have no objection to that whatever because, as we all know, their stock of capital, like the stock of the nation's capital after their Administration, is sadly depleted and badly needs replenishing. But I do object when they hang up this banner of freedom in their approach to the trade unions and urge them really to jeopardise the Government's freeze measures which are designed to repair the economy.
Our economic problem is not new, nor is the crisis we face a new crisis. Crises have been recurring for many years. Hon.

Members opposite have had ample opportunity to display their ability to deal with crises, but they have provided ample evidence of their inability to do so—and certainly to deal with crises in a fair way. To substantiate their attack this evening they must do two things that they have so far failed to do. The first is to prove that the freeze that was announced on 20th July was not necessary, and the second is to prove that the policy would be effective without Part IV.
Hon. and right hon. Members opposite do not challenge the existence of the crisis, in fact they publicly gloat over the existence of the crisis—of course, in cultured terms. Given the benefit of hindsight, and no one needs hindsight more desperately than hon. Members opposite, they can assure us that had they been in office there would have been no crisis. What they could have done was to "fiddle" the clock. They tell us that it was a simple matter of timing. Their spokesmen time and again have reiterated the panacea of a question of timing. These complicated issues are not really complicated; these difficulties are not really difficult, for the Conservatives.
I would remind them that in view of the crises of 1956, 1960 and 1964 there was eloquent testimony to the fact that when they claim that they could have avoided this crisis they are just throwing water into the wind. It is just possible that the crisis could have been averted had the Declaration of Intent, which was signed in December, 1964, been completely fulfilled. Management and unions made a solemn pledge at that time that income increases would be kept within the norm of productivity increase of 3½ per cent.
We are all well aware of what has happened since then. Income increases have more than doubled productivity increases. The country has suffered many balance of payments crises. For the last five years we have had these crises. Tonight, not only are our international creditors uneasy—God bless them—but our own people in Britain are tired and weary of the treadmill of prices chasing wages and wages chasing prices.
I contend that the one freeze has been accepted with two exceptions. The first is a tiny majority of trade union leaders who have refused to co-operate. In this debate later this evening I hope we shall


hear the reasons for this. The second exception is hon. Members of the Opposition who hoped that Part IV would give them the opportunity to clobber the Government. I do not blame them for this, because the Leader of the Opposition has been clobbered so frequently and so brutally by the Prime Minister that I cannot blame them for trying to get just a little of their own back. But I suggest that the tactics they have now adopted of trying to ingratiate themselves with the trade unions are mistaken because at the same time that they try to ingratiate themselves with the trade unions they say that they want to reform the trade unions.
This is a classical case of wanting to have your cake and to gobble it. The very idea of hon. Members opposite trying to reform anyone is uproariously funny, but the idea of Conservatives trying to reform the trade unions is rather like a drunken bankrupt preaching abstinence and thrift to a bank manager. I gather that the unions, however, are not tempted by their blandishments. The overwhelming majority of the trade union movement have accepted the freeze.
Unfortunately, there is this minority which has undermined discipline and the will of all trade unionists to combine. We have to recognise that in this complex industrial society any minority is able to blackmail to some extent the majority and the minority will undermine the voluntary principle. By their actions during the last few weeks and months they have undermined the voluntary principle.
These critics of the freeze on our side and on the opposite side know full well that a voluntary incomes policy is akin to spectators at a cricket match. There, if everyone sits down everyone gets a fair view, but if a few stand up the rest are at a disadvantage. I suggest that the very people who have undermined the wage freeze are those responsible for the Government invoking Part IV. I suggest that the Government are determined to deter the greedy and protect the needy. That is why they will invoke Part IV.
I want to say a word to my right hon. Friend the Lord President of the Council. As I originally understood the productivity, prices and incomes policy, it was

a measure designed to solve a clear economic problem. The problem was simply that in a society where we have full employment there is a clear undeniable need to recognise the fact that incomes should conform to productivity. That is a simple economic fact, but the essential prerequisite of this agreement for this side of the House—certainly for me—is that there is full employment because the whole point is that there is no slack in the economy. Because we had full employment and were officially committed to full employment, the problem arose. The policy was agreed.
I must tell the Government that they cannot have it both ways. Unless the Government can grapple, and grapple successfully, with this question of unemployment, which no one on this side of the House will tolerate, I very much regret that strong Government supporters like myself will be compelled to think again. We shall even be compelled to consider withdrawing support from the policy if the Government persist in allowing even the level of unemployment which we are facing today.
I believe that the nation will judge the Opposition's approach to this debate with the attempt to pin the label of compulsion on us in the same way as the nation judged one of their more distinguished predecessors 20 years ago, when he warned about the Gestapo and loss of freedom under a Labour Government. I believe that the nation will support this vital short-term principle as a necessary prelude to a period of long-term economic expansion.

7.30 p.m.

Mr. Richard Wainwright: The hon. Member for Stoke-on-Trent, South (Mr. Ashley) accused the right hon. Member for Enfield, West (Mr. Iain Macleod) of switching to political pantomime. Not so. We on this bench wish that the whole Conservative hierarchy, including any who might be awaiting redeployment, could have been here to hear the right hon. Gentleman say deliberately and eloquently how much better it would be if there were a free vote tonight. Yes, indeed.
I should like to offer an impression to critics of the Government who sit opposite, an impression derived by way of coming from a region which, apart


from Colne Valley, is wholly and exclusively Labour—25 Labour M.P.s and not a Tory in sight. My impression, for what it is worth, is that the public there is not impressed by criticism on one great divisive issue after another being expressed only by abstaining ostentatiously or by abstaining under the counter.
There were many gaps in the First Secretary's argument, but no gap greater than on the subject of prices, especially after 1st January, when we move into the next phase. It seems to us on this bench very odd, when there has been so much talk—no decision, but so much talk—about criteria and about the new phase we are entering into in January, that so little has been said about criteria for prices.
I remind the House of the paragraph which attempts to deal with this in what we must now regard as the new Schedule 2 which was introduced to the Act on 12th August. Paragraph 5 reads as follows:
In some instances an enterprise may feel compelled to propose an increase in price where it finds it impracticable to absorb increased costs over which it cannot exercise full control (e.g. manufacturers whose products include a proportion of bought-in components). Any such cases will be subject to the most rigorous scrutiny in the light of national economic needs, including the requirements of export trade".
I find that literally meaningless. I also suggest that if anybody can put a meaning to that jumble of words it will be quite impracticable to carry it out.
I will give just a random example which is humdrum and typical of work which tens of thousands of fellow accountants are doing every day up and down the country. On Friday, I looked in for an hour at an operation which is being conducted on only a moderate sized company which deals in about 5,000 lines which are of some importance to the life of the country. Accountants are engaged there on revising the whole costing system for this company—the method of budgeting, the allocation of overheads, the treatment of vexed problems like apprentices and how far they are regarded as productive or non-productive, and all the rest of the familiar operations.
I arrived at the virtual conclusion of this work. It was clear that the board of that company will be recommended to

lower the price of a handful of those lines, to leave a few undisturbed, and to increase a very large number. That is the result of something which is going on in tens of thousands of firms. I should be very surprised if anybody from the Government Front Bench succeeds in convincing the House that skilled work of this kind will be audited with any care by any kind of bureaucracy which can be strung together in this country. It is manifestly impossible.
Yet we are told that there are to be splendid new criteria operating from January. Now that there are only two months left, let us know what they are to be. There has already been reference to the manifest charade of the prices part of the Act embodied in the Order about laundries. Surely many hon. Members must have shared my experience. I attended a women's meeting in my constituency as far back as 22nd July when women were waving chits they had received from their laundries then, three months ago, announcing increases in costs. Three months later the stable door is shut.
If anything is to be said—not to laundries; I make no allegation against them—to those who claim price increases because of the S.E.T., I give the Government this hint. The first thing they should do is to see that all these people are paying the S.E.T., because my information is that the returns so far do not suggest that people are rushing to buy the stamps each week in accordance with their strict statutory duty which is so very slackly enforced.
On the prices section of the Order, the Liberals believe that if the House passes it, we are simply carpentering a chair for a new King Canute who will be just as helpless and just as ridiculous as the original.
I hope that the Government will not be deceived by the fact that their shock treatment of a total and temporary freeze on incomes has been relatively well received by public opinion, according to the Gallup polls, and by the trade unions which, to their honour, were largely conceived in a puritanical Methodism which is always ready to tighten its belt and respond to a call for sacrifice.
I do not believe that the temporary response to a call for total overall sacrifice is any guide as to how public opinion


will react once we reach the infinitely more difficult phase of saying that there is jam for some, there is spread for a few, and there is dry bread for many others. This will be an entirely different operation.
I want to spend a few minutes spelling out some defects of the overall nature of the freeze. The breach of contract aspect has already been eloquently deployed, but there is also bitterness in certain quarters about the fact that firms, or indeed the Civil Service, which happened to have fixed scales of increments already in operation, are to be allowed to continue them, while other firms—and, I would think, in many cases better managed firms—which take the trouble to look at employees one by one and not to take the easy, slack, lazy way of laying down a fixed scale of increments, are prohibited from granting increases.
A doctor of science who wrote to one of my colleagues from an address in Kent this very week said that the exemption of incremental scales will have
the effect for example that members of the Scientific Civil Service will continue to receive annual increments of over £100 during the freeze and in the period of severe restraint which may continue for some considerable time. …
We are thus in a position where an employee in industry can double his productivity as the result of improvements in a process and get nothing, whilst his counterpart in the Government service continues to be rewarded simply by getting older".
That is a defect in the concept of total freeze which illustrates the unfortunate nature of the whole operation.
The most important consideration is what is to follow. We on this bench look upon the total freeze rather in the same way as the way in which, before the discovery of anaesthetics, people were put to sleep prior to a serious operation, very often by being given a stunning blow on the head to put them out while the surgeon got to work.
This method of anæsthetising people was very unpleasant and crude. No doubt, if the patient eventually recovered, he was willing to look back with some tolerance on that ugly process. The whole point is the nature of the subsequent operation and we on this bench are certainly not prepared to support an

Order of this kind when we have been told nothing about the operation which is to be performed under the Government's anæsthetic.
Those who happen to read The Guardian will be aware of the extraordinary scenes which took place last night only a few yards from this Chamber. I must not dwell on that at length, but from the Conservative side the incomes policy was entirely ridiculed in the most eloquent prose entirely contrary to the Opposition's official doctrine. From the Government side the Parliamentary Secretary was unable to give a large and intelligent audience any clue at all as to what is to happen in as little as two months' time.
Because the whole policy is not only riddled with inequities, but is only in aid of further improvisations from day to day, we on this bench intend to use our free votes freely against it.

7.40 p.m.

Mr. Raphael Tuck: I have the misfortune to differ from some of my hon. Friends with whom I generally find myself aligned. I differ not only in opinion, but shall probably differ in my action tonight when a Division is called. But I also want to make clear to all of them and to the House that despite those differences I regard their opinions as sincerely and honestly held. I do not wish them to think that I attribute any ulterior motive to them.
We face a national emergency. A national emergency can take many forms. When there is a war people are called up to serve in the Army. It is no use their saying, "Oh, no. We are sorry. Jack doesn't want to go", or, perhaps, "Frank does not want to go. He is not coming and we are not coming either until you have given us an increase in our wages". That would be an impossible attitude. It is no good.
A national emergency now threatens. When the emergency is war there is physical danger; now there is economic danger. We may be sliding towards the abyss of economic collapse, and in this national emergency it is the country which is at stake, not just the Government, and one is called upon to support one's country. It is all very well to lay the blame for the present situation at the Government's door. Some people blame the


trade unions, others blame the employers and the retailers. In this connection it is interesting to note how the Opposition have made an almost about-face. They have now come out as the friend of the trade unions, and say, "The trade unions are very good boys. We admire them and want to do the best we can for them." This is a new look. The Opposition now appear as the champions of the trade unions. "Codlin's the friend, not Short".
The blame must be divided. I blame certain trade unions, certain employers and certain retailers, because if, as my hon. friend the Member for Stoke-on-Trent, South (Mr. Ashley) said, restraint had been practised we would not be in our present position. Certain people, however, did not practise restraint and there was an increase both in wages and in prices. Not only did certain trade unions stand out and insist on increases in wages, and certain employers and retailers increase their prices, but there was the export of sterling when there was a run on the £.
The export of sterling was not done by the trade unions. It was done by other people—I shall not mention who, I need not mention it. Those people are the first to stand stiffly to attention when the National Anthem is played and declare themselves patriots, but when the country's future is at stake and the country is in danger they will stab it in the back by exporting sterling, with the result that there is a further and serious run on the £. There is patrotism for you! To me, patriotism means love of one's country, and it is our country which is at stake tonight.
The voluntary system has not worked and I agree with my right hon. Friend the Member for Leeds, West (Mr. C. Pannell) that it cannot work. My right hon. Friend the Foreign Secretary, then the First Secretary of State and Secretary of State for Economic Affairs, was perhaps too starry-eyed in thinking that it would work. I do not think that it will. I should like to see it work in the field of Income Tax, but it certainly will not. Even with the present compulsion it does not work. We still find "fiddling" going on and that "fiddling" is not being done by those who pay their taxes by P.A.Y.E. [An HON. MEMBER: "They never get the chance."] Exactly. Trade unionists

never get the chance to "fiddle". It comes from another quarter entirely and everybody knows who the culprits are.
The Government have now belatedly reached the conclusion that the freeze must be compulsory rather than voluntary and I support that conclusion. I regard my opponents on this side of the House as entirely bona fide in their opinions, but they talk of collective bargaining. It has been said that we are abolishing the right of collective bargaining. The idea of collective bargaining was all right in 19th-century economics, when there was free-for-all, but it is not right today. In my view there should be collective planning and not collective bargaining. This was started by my right hon. Friend the Foreign Secretary when he was First Secretary, when he did something nobody had done before. He got both sides round the table, he got the employers and the unions to talk together, and that is how it should be now. The unions should play an integral part in collective planning with the employers and the Ministry. Both sides must take part in this and have the whole economy in mind rather than the wants of a single union.
For the reasons I have given, I shall support the Government in the Lobby tonight. The alternative is a free-for-all, and if there is to be a free-for-all in wages there might as well be a free-for-all in prices. But I press the Government to see that this freeze is a total freeze. Last Thursday, my hon. Friend the Member for Liverpool, Toxteth (Mr. Crawshaw) asked my right hon. Friend the First Secretary whether he was
aware that what many people on fixed incomes—especially pensioners—are more concerned about is whether prices are voluntarily being held down? Can he assure the House that he will apply the same vigour in keeping down prices—which I believe that he has rightly applied—in respect of incomes?"—[OFFICIAL REPORT, 20th October, 1966; Vol. 734, c. 372.]
My right hon. Friend the Leader of the House can talk till he is blue in the face about the Index of Retail Prices. Since July prices have gone up. Ask any housewife and she will say that. Prices in the laundries are merely one example.

Mr. Gwilym Roberts: Would my hon. Friend agree that the difficulty in terms of prices is that the assumption that prices have not increased depends on the construction of the Retail


Price Index and because, nowadays, there is generally recommended prices for each article which is not always that charged in the shops what has actually taken place is that there have been changes away from the recommended prices and these have not yet been statistically detected in the index?

Mr. Tuck: I entirely agree, but the point is that prices have gone up.

On the question of laundries, my hon. Friend the Member for Birmingham, Aston (Mr. Julius Silverman) said that the stable door had been shut after the horses had bolted. But I think that my right hon. Friend, in his opening speech, gave an indication that he will try to catch those horses and put them back in the stable. He said that he "might" and I ask him to say that he "will", and that he will see to it that prices are reduced to what they were before 20th July in the laundries.

Other prices have also gone up, including the price of food. In my constituency when one has a 5s. meal at a Ranks restaurant one finds underneath the bill, "S.E.T.—3d.", which is an addition of 5 per cent., though we were told by the Chancellor that S.E.T. would raise prices by only 1 per cent. or 2 per cent. That is not all. One finds in the Members' Dining Room that certain prices are increased by 20 per cent.—and in the House of Commons, of all places! I have a Question down on this for my right hon. Friend the Leader of the House tomorrow and I hope to get an interesting answer.

Prices have gone up. What about dividends? It has been rightly said that there is no provision in the Act to deal with dividends. In heaven's name, why not? Even though companies appear to go along with the Government, dividends can be salted away now and can be paid out later when the freeze is over. Action should be taken at once to stop it. It only requires legislation, and the Government ought to put that legislation into effect now. I call upon them to do so.

I am sure that the Government are acting bona fide. I am sure that it is not their intention to freeze wages while allowing prices, dividends and other incomes to soar, but if they had been out to convince the House and the nation that this really was their intention they could not have made a better job of it. They

seem to have gone out of their way to give that impression by the ham-fisted way in which they have tackled the problem.

I call upon the Government to right that wrong now and to show us clearly and beyond doubt that they have no such intention. They have the chance. Let them seize it.

7.50 p.m.

Sir Charles Mott-Radclyffe: This has been a remarkable debate for one reason if for no other, that it has engendered very little enthusiasm in support of the Government. Even the First Secretary of State, for whom I have the highest regard, was unable in his speech to draw very many cheers or much support. He gave the House one blinding flash of truth when he said that no one could be prosecuted before an offence was committed, but it seems to me that a good many hon. Members opposite have a guilt complex. I do not blame them. Ringing in their ears are their election speeches. They are frightened to read their own election addresses because the measures which the right hon. Gentleman now asks the House to accept bear absolutely no relation to what was promised and what was said only a few months ago.
Even the hon. Member for Stoke-on-Trent, South (Mr. Ashley), who has left his place for the moment, was critical towards the end of his speech, I rather enjoyed one of his analogies, although I do not think that he meant it to be taken in the way I shall take it. He spoke of people watching a cricket match and said that if those in the front sat down those at the back could see. But, to continue the analogy on a slightly different line, what is it that the people in the front or at the back have been watching? They have been watching the Socialist side sitting in the pavilion working out the most complicated and fantastic theories and then, when they took the field, finding the wicket absolutely different from what they thought it would be. In a nutshell, this illustrates why economic crisis is hitting us now.
I am not an economist, a banker, an industrialist or a lawyer. I am not a director of any company and I am not a trade unionist. But I make no apology for having my say as an ordinary plain back bencher. I do not understand a


lot of the theory or much of what I think the Government believe to be the practice behind Part IV. Of course, I understand that, if a nation pays itself more for producing less, there is inflation. But an answer given at Question Time today showed that one of the biggest inflations has taken place in the Civil Service.
I have always understood that, when productivity increases, wages and salaries should go up and keep in step. That, I thought, was the theory shared in many respects by both sides of the House as to how to get productivity going. A great many wage agreements are, rightly, based upon productivity. The cost of living index also affects many demands for wage increases. But what have the Government done? The Selective Employment Tax has put up the cost of living. Everyone knew that it would. The hon. Member for Watford (Mr. Raphael Tuck) seemed surprised that various prices were rising. But everyone said at the time that they would. It was bound to happen, as night follows day. There is nothing new or strange about it. If charges in the service industries are increased, the customer pays, and this will affect the cost of living index to a considerable extent, affecting in turn the pressure for wage increases.
The Government, having applied the S.E.T., indirectly put up the cost of living. Now, having done that, they say to employers, be they individuals, companies or corporations, "You must dishonour the wage agreements you have made in respect of productivity because we are in an economic jam and we do not know what to do. We must have a wage freeze".

Mr. Raphael Tuck: The hon. Gentleman said that I was surprised that prices had risen. I should not have been surprised at prices rising by the 1 or 2 per cent. mentioned by the Chancellor of the Exchequer. What has angered rather than surprised me is that prices have risen far beyond that, by 5, 10 or even 20 per cent. People have used this as a pretext for raising their prices far beyond what they were entitled to do.

Sir C. Mott-Radclyffe: What surprises me now is that the hon. Gentleman did not know that the calculations made at the time of the institution of the Selective Employment Tax were quite wrong.
The Government now tell employers that they must dishonour contracts made in respect of productivity. This is a very serious step. It is unheard of either in war time or in peace time. If this is the Government's first step in trying to solve an economic crisis, what will the next step be? Employers are told that they must dishonour contracts already entered into based on higher productivity, but employees, quite rightly, reply, "You must stand and deliver. You promised you would". The employer says that he is sorry, but Government legislation forbids him to do so. In these circumstances, how are we to get production going? If we do not get production going, how on earth are we to get out of the wage freeze? It is the "hen and egg" argument all over again, and I see no end to it.
A good deal has already been said about prices, and the Statutory Instrument applies to prices in some respects. Some prices can be controlled statutorily, but not all. The Government cannot control all prices, and I do not believe that they should. The moment the Government start to control prices by statute—and this will be the next step following the wage freeze—they interfere with the free laws of supply and demand and make an absolute nonsense of the whole economy. If five desirable bungalows or houses are built for sale and 25 people are after them, how is the price to be controlled?
We have had references to dividends, and the hon. Member for Watford wants to control dividends, too. I have no doubt that, in the legal or Parliamentary sense, we could legislate to control dividends. My right hon. Friend the Member for Reigate (Sir J. Vaughan-Morgan) told us earlier of his own company being forced to pay a dividend lower than it had promised. But if companies are forced by statute to pay a lower dividend than the one they have advertised, what happens to investment? Where does the capital come from? Above all, where does the risk capital come from? Why does anyone invest their money in anything if it is not in the expectation of a dividend? If all profits have to be ploughed back and retained, then there is no dividend. Now I will give way.

Mr. R. B. Cant: rose—

Mr. James Dickens: rose—

Mr. David Winnick: rose—

Mr. Deputy Speaker (Sir Eric Fletcher): Order. If the hon. Member for Windsor (Sir C. Mott-Radclyffe) gives way, he should indicate to which of the three hon. Members he is giving way.

Sir C. Mott-Radclyffe: I give way to the hon. Member for Stoke-on-Trent, Central (Mr. Cant).

Mr. Cant: Is the hon. Gentleman aware that those countries which devoted the highest proportion of their gross national product to investment are those in which business distributes more dividend and puts less to reserves?

Sir C. Mott-Radclyffe: They distribute more to dividend and put less to reserves?

Mr. Cant: Yes.

Sir C. Mott-Radclyffe: I did not hear the beginning of the hon. Gentleman's interruption.

Mr. Cant: Is the hon. Gentleman aware that those countries which devote the highest proportion of their gross national product to investment have a policy in which their companies distribute in dividends more than they put to reserves?

Sir C. Mott-Radclyffe: That seems to be an argument in my favour. It puts the case in simpler and more forthright terms than I was putting it. It is an argument against the Government. I do not think the hon. Gentleman realises the full implication of what he has said.
In the present situation the Government have started by trying to control wages. As we expect, they will then try to control prices and dividends and that is a very long way down the slippery slope. We shall no doubt eventually have a reference to the control of salaries, and if there is statutory control of salaries I wonder how many hon. Members opposite will be able to persuade anyone to be the chairman of a nationalised industry.
I shall go into the "No" Lobby with the utmost joy tonight because I do not

believe that Part IV is practical. I believe that it is not fair, that it operates quite fortuitously between one individual and another, that it does not make economic sense and that it has been instituted by the Government who have sown the wind and reaped the whirlwind and do not know what to do.

8.5 p.m.

Mr. Norman Atkinson: This is a fascinating debate and particularly so in following a very ordinary back bencher. I think that the ordinariness of the hon. Member for Windsor (Sir C. Mott-Radclyffe) illustrates the confusion of the party opposite towards many of these basic questions. I am obliged to the hon. Gentleman for explaining the function of the system under which we live—profit—and for showing why there are so many dilemmas on the benches opposite.
I want to refer to the remarks made by my hon. Friend the Member for Stoke-on-Trent, South (Mr. Ashley) and my right hon. Friend the Member for Leeds, West (Mr. C. Pannell), both of whom laid down a criteria for their support and spoke about the whole question of unemployment and the Prime Minister's promise. On three different occasions the Prime Minister has said that unemployment arising from the July measures would not rise above 480,000. On one occasion he said that if there were any sign of that figure being exceeded he would reverse the machine.
Either the Prime Minister meant what he said, either he believed what he was saying and intends to do something about it, or we come to the conclusion that he is not in control of the unemployment figures. So the question of his integrity is involved and I think that it is time we said that, so far as unemployment is concerned, Nemesis is on his tail and that he should take cognisance of the remarks made by my right hon. Friend the Member for Leeds, West, and by that other great supporter of the Government, my hon. Friend the Member for Stoke-on-Trent, South.
Perhaps I can also refer briefly to the right hon. Member for Enfield, West (Mr. Iain Macleod). He gave a seductive invitation to hon. Members on this side to join the Opposition in the Lobby. But he then went on to detail the very reasons


why we cannot ever in any circumstances join them in the same Lobby, for he outlined clearly the class approach which they make to these questions.
The right hon. Gentleman said that there could be no control of dividends and that the Government have about as much chance of controlling prices as they have of controlling the weather. By commenting this way, the right hon. Gentleman illustrated the position in which the Conservative Party stands in its attitude to these things. The Conservatives were consistent advocates of wage control and restraint throughout their 13 years of office. The right hon. Member for Wolverhampton, South-West (Mr. Powell) was one of the prime architects of the 1957 deflationary package and at the time argued the virtues of wage restraint, along with Mr. Peter Thorneycroft, then Chancellor of the Exchequer.
All along the line, the Conservative Party has advocated wage restraint, whether it be in a period of inflation or of deflation. In 1963, when we had the highest post-war unemployment figures, right hon. Members opposite were also asking for wage restraint although the original architect, the right hon. Member for Wolverhampton, South-West, had then deserted the ideas which he promoted while Financial Secretary to the Treasury in 1957. The class approach which they take to this is the reason why we could not join them in the Lobby.
It was a surprise to hear the hon. Member for Colne Valley (Mr. Richard Wainwright) identifying the Liberal Party with these ideas. He said clearly that the Liberal Party does not believe in any price control and that it is not possible. That leaves us on this side of the House as the only advocates of price control among the political parties. That is an important point for the country to remember. Even so, we can eliminate certain hon. Members on this side because they likewise argue that price control is a difficult and indeed impossible task because it would interfere with the very basic function and motivation of the kind of society which we have. Tonight, there are present quite a few of those of us who are the true promoters of the idea that price restraint is a method of inhibiting the economy.
I pass rapidly to the issue of how to approach the problems with which we

are faced. I am sorry that the Leader of the House has disappeared, because he has made some interesting comments about linking the reform of Parliament to the setting in motion of study groups or research projects about emergent new ideas. I hope that he goes ahead with the idea, but I hope that any committees which result will be entirely different from what has been seen before. We should separate those who have supported price restraint as an inhibitor from those who have been open advocates of wage restraint. In that way we could contribute to the two groups and make our contributions much more constructively than would otherwise be possible.
This afternoon my right hon. Friend the Secretary of State spoke of the necessity for the Government to take these measures. Like all other members of the Government, he has grossly exaggerated the situation which has existed for the last seven or eight years. Over recent years—it has been true of all the post-war years, but I will take only the period to which my right hon. Friend referred, from 1957 onwards—there has been an annual inflationary increase of about 1½ per cent. In other words, wages have been increasing beyond productive capacity, or spending power has gone beyond available goods, about 1½ per cent. per year.
Of course, there has been an export problem of an increase in prices of about 1½ per cent., but that has been partly offset by an increase in import charges of about 1 per cent. The point of this is that the problem is not unmanageable because of its size, and its size does not exclude the use of price controls while allowing free wage bargaining. This is a problem which must be kept in proportion.
Like his colleagues in the Government, my right hon. Friend does not see how we can manage a mixed capitalist economy with full employment without having some form of permanent wage restraint built into the system. I totally reject that view and it is unfortunate that it is now becoming the very basis of the thinking of my right hon. Friends and of some of the leaders of the Labour Party. We should now be demanding evidence to support the belief that permanent wage restraint must always be the price if we are to live in this kind of managed economy.
Having spoken of the origin of the policy of wage restraint, I hope that the time is not far away when we can get away from the Treasury ideas and influences which, combined with banking and financial interests abroad, have conditioned one Government after another into acceptance of the idea that the only way in which we can successfully manage a mixed economy is by having wage restraint, a theory which I completely reject.
Why do I say that today's Order is unfair? The first reason was given by the right hon. Member for Enfield, West, who pointed out that the Order was concerned only with organised workers. That is why we say that the introduction of measures of this kind is basically unfair and quite alien to the views of the movement to which we belong, My right hon. Friend said that it was necessary to have a policy of this kind in order to help lower-paid workers, and yet we know from experience that the opposite happens in circumstances of this kind.
I return to my interjection about doctors' pay, which illustrates the problems which arise for lower-paid workers in a wage freeze of this kind. The Government deliberately excluded doctors from the freeze from 1st October this year, and they did so with their eyes wide open at the same time as rejecting the claims of railwaymen and certain hospital workers and other lower-paid workers who are employed by the Government. Justifiably supported by every hon. Member, they agreed that doctors should receive their increase from 1st October. They were hoping that this would not be mentioned and they have been careful to point out that the increase for the doctors would be paid only from 31st December. But the cheques now being made out by the Ministry of Health in preparation for the pay-out to the doctors on 31st December include three months' arrears, so that as from 1st October the doctors will have had the increase for which they negotiated a long time ago and to which they are entitled.
The Government themselves have thus deliberately broken their own freeze in favour of organised professional workers while rejecting the claims of railwaymen and other lower-paid workers. The important thing about lower-paid workers

is that about 80 per cent. of them are employed either directly by the Government, or through local authorities or similar agencies. The remedy is, therefore, in the Government's own hands. They can adjust their own attitude in order to solve the problem of lower-paid workers who, because of their employment by the Government, always become the first casualties in any period of wage restraint. In wage restraint the Government cannot avoid applying the measures to their own employees, who include most of the lower-paid workers. The policy is, therefore, totally unfair on two counts.
The third reason why it is unfair is that it concerns organised workers and thus cannot apply in any way to more than about one-third of personal incomes. This legislation applies to a minority of personal incomes. I have heard the reasons why it is said not to be possible to legislate to control dividends. We know why hon. Gentlemen opposite oppose any control of dividends, but this legislation deliberately excludes such control. No matter how efficient the administration of the Orders may be, it cannot control or restrain more than one-third of personal incomes and those incomes are earned by people who are organised by our own movement and by our trade unions.
There is, therefore, a further defect in legislation of this kind and it spells disaster for the movement which we on this side of the House support. I say that because controls of this kind transfer from the negotiating table final responsibility for wage levels. Once workers and managements have negotiated a settlement, because of the Prices and Incomes Act the settlement has to be referred to a statutory body, the Prices and Incomes Board. The workers having agreed with their employers to a settlement, the workers then find that the settlement is transferred elsewhere for authority, and once it goes to the Board the Government, in this case a Labour Government, have the choice of agreeing to or rejecting the settlement, and in any period of wage restraint of necessity the Government have to reject it, which means that the workers are no longer in conflict or controversy with the employer, but that conflict exists between workers and Government.
Therefore, we see disaster in this situation and argue against the introduction of these measures. I do not want to take more than my share of the debate and I rest my argument on the points which I have made. There is sufficient indication to show that these measures, which the Government are now asking us to support, are so contradictory to the aspirations of the movement to which we belong, so negative, so completely opposed to the principles which Members on this side of the House were elected to protect, that I do not believe that it is possible for Socialists such as myself to go into the Lobby tonight and support them.

8.20 p.m.

Mr. David Howell: I had no difficulty in getting the message of that speech. Part of it was an attack upon our side and the other part was an attack upon the hon. Gentleman's own side. With the ritual attack on our side I sympathise, I realise that he has to make it; with the attack on his own side I find myself, up to a point, in broad agreement. However, it does not amount, as it stands, to a very constructive policy. It needs a certain amount of development on lines which in my view he would not agree to.
I want to turn to a rather different aspect of this debate. We have heard a great many words spoken about the way in which this Order flouts law and liberty, and with most of those words I would agree. I want to draw attention to a practical and immediate consequence of this Order and of the whole theory of the freeze, of which this is a rather dramatic part. My immediate charge is that there is little doubt that this Order, and the latest way in which it has been handled and applied, plus the breakdown in relations with the C.B.I., means that this is the straw which is breaking or may have broken the back of business confidence.
Not only that—and I think that this is really the more crucial and dangerous point—we are now coming to a situation in which the restoration of confidence, or the time when reflation can begin on a sound basis, may now be postponed for a far more worrying length of time than is realised. I say that after listening to the very lucid speech of the right hon. Gentleman the. Member for Leyton (Mr. Gordon Walker) who talked about an export-led boom and how easy it might be to turn

on and off taps. Against the world background and the way in which the Atlantic economies are shaping up, this question of export-led booms and turning on and off taps will be a far more critical and dangerous thing, given the stage at which confidence has now sunk and the stage which policies have now reached, than many hon. Members realise.
We have heard speeches this afternoon from hon. Members pressing for early reflation—for reflation now. It is rumoured that even Ministers on the Treasury Bench are kicking against the present situation. My right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) said that he stood by the Government in resisting these demands. My proposition would be to go further than that and say that the Government have put themselves in a situation when they have no choice but to resist these demands for a long time ahead. They have placed themselves in a critically uncomfortable dilemma.
Consider the position. Business investment has now gone into a long and deep slide. That means that confidence has been dangerously shattered in a way that will not be restored overnight. In addition the Order now sought to be imposed creates further confusion and has no doubt accelerated the rate at which confidence was already falling. To reverse this sort of situation, when confidence has snapped, would be difficult enough if the world outside did not exist. But it does exist and it is a world which is not in a particularly healthy state. As hon. Members will know, the West German economy has reached a stage when the credit situation is extremely tense; the United States' economy is not healthy and looks like running a high temperature, if it is not doing so already, and the French economy is not in very good shape, either.
We are moving into a situation when for any country, however efficient, to go rushing into world markets in an export-led boom would be difficult enough. When, in this country, in addition to the world situation, we have this collapse of confidence at home, then we are really in a situation in which the only way of reflating will be to inject, or to re-inject a demand stimulus of a size and of a balance which I do not think has so far been contemplated. It is not just a


question of turning on and off the tap. It is a question of looking ahead and facing a situation where, both inside and outside of the economy, a reversal of the situation, an upward climb, will demand very sharp measures indeed.
This brings us to the crux of the dilemma, because it is precisely these kinds of violent reflationary measures which will automatically place the impossible strain upon sterling again. There is no other outcome. In short, the situation that we have slipped into without many people noticing it is that the Government have round their neck a label which may be with them for a long time, saying, "No reflation without crisis". Every action which is taken, either by this Order, or other parts of the Government's measures under the freeze policy, will reduce confidence more and make the task of the Government in restoring confidence that much bigger. The certainty of an immediate crisis following inflation will also be made that much bigger.
That is the dilemma which the Government have forced themselves into. Short of surrendering to it by letting sterling go, there is only one serious course which they can take. This may be rejected by hon. Members opposite, but it is the only course. It is to take measures which genuinely restore confidence, which reject the idea of the freeze. What has been so worrying about the wages situation is not that wages have been rising too fast, nor that wages are too high, but that the whole pay structure of the country is fossilised.
It is ridiculous to say that wages have been rising too fast and to base policy upon that. Hourly earnings in West Germany, Italy and France have risen far faster in the last seven years, between 1959 and 1966, than in this country. As my right hon. Friend the Member for Enfield, West said, to attack wages and prices is to attack the symptoms. That is a point very well made in a report from the Marlow Foundation published yesterday, which I commend to hon. Members. The trouble is not that wages and prices are rising too fast, but that new methods and processes in industry require new methods of remuneration if we are to have a proper wages structure
That is the core of the problem on the labour market side. The hindrances to breaking out of this situation are, first, second-rate management, and, secondly, stone age labour practices and the law which enshrines them. These are the things which we should be changing if we are to restore confidence. The argument that it is necessary to have a freeze to restore confidence with foreign bankers is basically wrong. What is required is changes in the law and in the situation relating to wages, but not changes of the freeze kind.
Hon. Members on this side of the House have always argued that in order to restore confidence we must remove the legal intimidation which allows these practices to continue, attack restrictive practices, both of management and labour, through the courts, and provide new incentive taxation. It is fundamental changes in national policy of this kind which are necessary if the Government are not to slide into a situation in which they face re-inflation or a major blow-up of the economy. It is a question of policy choice.
This afternoon, the Secretary of State for Economic Affairs gave us a lecture on the arguments for pulling together for what might be called the consensus theory of economic policy. He asked for a reassurance at the beginning of the debate that we were all in favour of a policy for productivity, prices and incomes. That just about covers every area of the economy. Of course, we are all in favour of a policy for productivity, prices and incomes. This means that we are all in favour of an economic policy; it goes without saying. What we are against is the kind of woolly, vague and therefore, because it is imprecise, basically illiberal thinking which backs up the prices, incomes and productivity policy of the Government.
Behind this thinking and these generalities lies the need for the Government to realise that they have a fundamental choice to make. If they do not make it now and move along the lines which we have suggested they will be forced to make an uglier choice next year, or probably the year after, which successive Governments have tried to avoid, and that is the choice between permanent stagnation and inefficiency, on


the one hand, and devaluation, on the other.

8.31 p.m.

Mr. Frank Cousins: The debate has ranged quite widely, as was intended, I am sure, but two fairly simple basic ideas have run through much of the expression of opinion from this side of the House. The first is that the overwhelming majority of trade unionists support the idea of the freeze, and the second, which came from the Government Front Bench, is I think simply defined by saying, "There may have been other things which we could have done. We were in a mess. As we were in a mess, we did not do the things which we might have done at the right time. It is up to you, on the basis of loyalty, to endorse the action which we have taken".
A third theme has been put forward from the Opposition benches, the siren call of the Conservatives as the representatives of the down-trodden trade unionists, the helpers in getting our emancipation.
We should treat all these three basic themes with about the same consideration. First, it is well for us to remember that whatever blandishments the Opposition hold out at the moment, they attempted, over a period of years of control of the administration, to apply this kind of policy each time that they got into a temporary economic difficulty. This was the basis of our criticism at that time. I think that the only thing which might be said in favour of what hon. Members opposite tried to put over was that they never went as far in their approach as we appear to be going now.
I said that the other theme was that the overwhelming majority of trade unionists support the idea of the freeze. I think that this is the most misleading, in fact almost mischievous, comment which could be made. When the Government were putting the Bill through the House some of us made it clear that we thought that it would, step by step, lead to the situation in which we are now. It has been recalled today that we were given assurances that this was the last resort and that no action of this kind would be taken in the early stages. We know what happened. We did not even wait to get through the Recess before we started to

introduce and give effect to Part IV. I suggest that had it been put to trade unionists in the form in which it stands there would not have been even the reluctant acceptance of the various stages which have followed one after the other.
I claim, I hope without any conceit to be representative of some of the views which have loosely been classified as trade union opinion. There is no such thing at any given moment as a constant trade union opinion. But there is a recognition that over the period the struggle which we have undertaken has been for a purpose. Within a system which is opposed to us, which is opposed to the rights of workers to get fair treatment, we have struggled and established our prerogatives, our principles and our rights.
The great feature of the current situation is that those things are being undermined bit by bit. They are being taken to the stage where it is now common practice for Ministers to stand at the Box pressing forward slightly the views that have been expressed. I need only refer to the Minister of Labour yesterday as an illustration when he said that we are not likely ever to get back to the era of full employment as some of us understood it.
The right hon. Member for Enfield, West (Mr. Iain Macleod), who opened the debate for the Opposition, was correct in saying that it has been a theme of all political parties that we want full employment. Nobody would have dared to go to the electorate and ask to be returned without saying that he believed in it. There was never a clear definition of what we meant by full employment. If we are not careful, we are drifting into the position that full employment means constituting a manœuvrable group of half a million unemployed in order to maintain control over the economy.
If that is the theme which is behind the various comments which keep coming from the Front Bench and the threat that even after the period of wage restraint and standstill we are still to be controlled and inhibited and can never go back to the free position which we were in before, that kind of situation will not be tolerated. I do not say this offensively. I say it practically.
When men or women realise that we on our side have accepted that we can arrange our economy to give a little


better unemployment pay, to give a little better guarantee of not starving when people are unemployed but that we do know how to resolve economic growth without having a reservoir of unemployment, equally our people will not accept either that attitude or Part IV.
The second part of this theme is that we were in a mess and, therefore, we ought to recognise that whilst there may have been things which could have been done, they were not done in time. I cannot accept that we can go to the end of the period and say that, because no one was willing to take advice about the kind of problems which would come, they can now say, "Having discovered you were right and that there is an increasing economic problem, you should now accept that although we did not see it first, we do know how to get out of it." Had there been a traditional approach from my kind of thinking—not from Conservative thinking—which said that we would tackle the economy in a different way entirely, that we would put money into investment and make public ownership our principle which we would develop, we would have gone towards getting the growth in the economy that we want.
The fact that those are the two themes can be illustrated throughout the discussion. Reference has been made time and time again to the Schedule, the Schedule which was not part of the debate on the Bill and which was brought in after the debate was over, when all the points which we argued on Schedule 2 were not accepted by the Government. A document is brought in which now purports to take the place of Schedule 2, which includes in it all the various things which have been quoted today about the early warning system as at present operated and which, we are told, will continue. We are told that there is the standstill, but that the early warning system will be continued and that the Minister will be told of the claims we are making which cannot be allowed.
When we argue about the rising cost of living and some of the factors in it—things like rent and rates—all we get is an exposition of why it is happening. We are told that there is to be a growth in rates but that local authorities will be asked not to put them up. In many

instances, however, the local authorities are not taking any notice. If we now say that the economy will be helped by the Orders made under Part IV of the Bill or by the operation of Part IV, which has no purpose unless we make the Orders, we will be guilty of misunderstanding the basic problems facing the economy.
I should like to put forward the point of view which some of my right hon. and hon. Friends hold. We do not agree that, because there is a mess, we ought to be prepared to accept anything. As has been said recently, we do not accept that the mess is as the Government are saying; neither do Government spokesmen when they speak in some places. They say that we are not in economic difficulties. We do not think that we are, either.
I would pose a question on the basis of fairness. Is the proposal which is being made a fair one, or is it just a continuing part of the planned approach to the reservoir of unemployment which is beginning to worry many active trade unionists in this country? Is that the basic reason behind the economic plans which we are making?
It is not too long ago since our party, when in Opposition, had a basic conflict between leadership and rank and file about whether we were justified in assuming that something like three-quarters of a million people needed to be unemployed to create an economy which was mobile and efficient. We did not accept that then, and I see no reason to accept it now.
The second part of the theme is that the introduction of Part IV, whether it is accepted by the Government Front Bench or not, makes normal trade union activity a criminal offence. I am not impressed by the idea that a man will find it difficult to get himself sent to prison. Of course he will, if he surrenders to the edict put in front of him. If he stands by the basic ideas for which he went into trade unionism, it will not be difficult.
During an earlier debate on the Bill, I read out subsection (4) of Section 16 of Part II, which is the references to penalties to which men are liable if they take part in ordinary trade union activities. I posed the question at that time, and I repeat it now: if a man takes part in trade union activities to try to breach an


Order, is he guilty of an offence? I am taking such steps now and trying to get the Minister responsible for issuing Orders not to issue them. I shall be told that that is an academic approach to it and that I cannot be in breach of an Order before it is issued. There is no sense in enacting Part IV if Orders are not to be issued.
We come round to the question of Part II and what it means to the people involved in the recent difficulties. I have heard it said that if people had behaved reasonably, it would not have been necessary to do it. That is all very well if everyone takes the view that "reasonably" means that when a Government spokesman says something it is the law of the Medes and the Persians. I will not accept that from any Government. This is what democracy is about.
Then I am asked the second question: is the introduction of this Order necessary? The Secretary of State for Economic Affairs has been at pains to show why it was necessary, and he says that it was because everyone wants the freeze to work. I do not think that they do. At the recent conferences, nearly half the people decided that, despite all the problems, they did not want to support the policy. Certainly they did not support the idea of having Orders made against firms in this kind of atmosphere.
I ask myself, would the observance of the Thorn Electrical agreement damage the economy to such a drastic extent that we need be unfair and say that the principles upon which we govern our democracy no longer count for us? What does the Thorn agreement mean? The right hon. Member for Enfield, West gave an outline of the facts and said that an agreement was in existence for a £1 a week increase. It is not quite as simple as that. My organisation has members involved, so if Mr. Clive Jenkins does not know the issues at stake it may be that I do.
Over a period of time from October, 1965, the manual grades got two sets of increases, whilst the clerical and administrative grades went on with discussions about the date of operation of their increase. The amount was fixed and was to be paid from 1st April, and it is still to be paid from 1st April. However, from 1st April until a date in early July, they were negotiating about the operative

timing and the application of it. They did not get it because of the sheer accident of discussions taking place between the firm and the unions involved. By an accident of discussion they are precluded from having it. Is this fair? Is this the way to create confidence within industry?
By its very nature, this House is sometimes a little self-contained. I do not think that it is any the worse for that. I have expressed my views about the House, but I have a great respect for its traditions. Many hon. Members discuss a problem from an academic point of view. They are given all the information that is available, but what is the consequence of this kind of thing? What will be the consequence if the Thorn agreement is not applied? Will the House fall? Of course not. Will Thorn Electrical fall? Of course not. But there will develop an atmosphere in the organisation itself which will not be in the interests of the growth of production.
What is the problem facing us? The problem with which we are concerned is the economic recovery of this country. It is not simply whether we can bring in an Order which says that if someone is doing something with which we disagree we can stop him. I do not care whether it is a question of going to prison, but I do not accept that the problem is whether, from this House, we can make people do what we want them to do.
Is there an economic problem? Is there a production issue which we have to face? If so, are we helping to get rid of the problem by stopping the agreement at Thorn's? The answer is that we are not.
Whether or not the House turns its back on the fact that high wages help to create efficiency in industry, I am certain that trade unions and business will not do so. I come from one question to another, just as the Bill went from one thing to another, just as the Declaration of Intent moved into the Bill, and the Bill became an Act, and finally we had Part IV of it.
Does this do anything to solve the problem of the equalisation of incomes? The answer is that of course it does not. It will be bad whether it is done now, or in three months' time. It all depends on the person to whom we listen. We are given different views about when we


will move out of this period of stop, having improved our economic situation. One Minister says that it will be after 1st January. Another says that it will be next April. Still another says that it will be after 11th August, 1967. Sometimes the issue is whether it will be four months after 11 August before we get the freedom to do what we would like, despite the Act, or whether we will then be told that a permanent feature of our economic situation is that the Government will tell us what to do. [HON. MEMBERS: "Hear, hear."] It may be that this is Government thinking. It was Government thinking when the party opposite was in power, so let us not have too much cheering.
Now that hon. Gentlemen opposite are the Opposition, they are recognising something which we recognised when our party was on those benches, namely, that the Government cannot control industry and the trade unions. All that they can do is to give guidance and help. One is not seeking a free-for-all by saying this. One ought to be in a position to say to both sides of industry, "Production levels in this country are not good enough. Efficiency is not great enough. Investment is not high enough. Modernisation is not just a theme." The Government ought to tell both sides to get together to solve the problems facing us.
There are many ways in which the Government can help. They cannot help by saying that they do not believe in increased production, in efficiency, and in efficiency payments. We talk loosely about making things better for the lower paid workers, but we have not the faintest idea of what we mean when we say lower-paid workers or who will be helped when we talk like that. It comes ill from both sides of the House to talk loosely about lower-paid workers. The tendency, not merely during the two years of this Government's tenure, but during all the time that I have been associated with the movement, has been to think about helping people—the figure was £2,000 income when the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) talked about an alteration in Surtax—not about the working group. We have not thought seriously about a new approach to this whole problem.
Next, is it possible to do this overall? Is it possible to make it fair? Is it possible to make it apply to prices, dividends and bonuses? The answer is, "No", from both sides of the House, although for different reasons. Of course it is not possible—not if we do it this way. But we can do a great deal towards price control if we have the intention of doing it. We cannot have price control by saying to everyone, "If you go to a shop and they charge you too much, then write to the appropriate Minister and he will investigate it". That is not the way to price control, because one cannot have that kind of price control without the elaborate machinery which existed during the war—and I do not think that anybody suggests that we should do that.
On the other hand, we can have manufacturing price control and raw material price control. But we cannot push up the price of raw materials in one breath and say that we are taking money out of the economy, and then, in the next breath, say that it will have no effect on our production levels and production costs.
If we want price control we shall have to tackle this aspect of it just as effectively and as determinedly as we apparently assume that we have tackled the question of incomes—and many hon. Members know that there are many adjustments to certain levels of income which took place in the past and that we have not stopped them.
The next question is: if it is not fair, can it be made fair? I suggest that the House will need to ask itself a very pertinent and very simple question. I mentioned this earlier. It is now said that the Government have a permanent place in the discussion between the employers and the trade unions. However much we may pretend, if the Secretary of State for Economic Affairs means what he said, that there is now a third interest, a public interest, which has to be brought into this discussion, then we have to define what we mean by it. It is no good saying, "There is now a third party sitting in your discussions". One has to define it. It is the Government. The Government are to sit in.
I ask myself, in what rôle? Are they sitting, as they sat in the Colonial Territories, as arbiters between employees


and employers? Are they there to tell them what the economy can stand and to make sure that there will be no strike action if there is no agreement? Is this the kind of thing that we envisage, or do we envisage something more elaborate? Do we envisage something like the Swedish system? We have not patterned ourselves on the Swedish system. The present policy has nothing to do with the Swedish system. It is true, as was said earlier, that no Government anywhere has taken this kind of power and tried to use it in peace time or in war time. Because the Government have not taken power to do a job; they have taken power to stop a job that is being done. That is all that has happened at the moment.
We have been told that the Government are having success because we have altered the inflationary tendency of money incomes. Whose money incomes? Most of the adjustments which took place last year which caused the inflationary tendency which Ministers and others talk about freely—they say that it rose by 9½ per cent., although much of it was absorbed by increases in costs—were related to adjustments in hours of work, some of which had been determined as long as three or four years ago. We cannot take them off again. We cannot say, "We put another 4½ per cent. on the cost of an hourly job by taking another two hours off the week", when we are not taking them off. The job had to be done. We have only now reached some of the standards in Europe, and we are certainly a long way behind some of the others. But if the suggestion is that there is a continuing inflationary tendency, caused all the time by the activities of the trade union movement, which is what the Orders suggest, how do we in the next breath argue that there are so many low-paid workers who have to be protected? We are attempting to argue the case two ways, as we always do on this matter.
I want another point to be understood quite clearly. A contract to us was a bond. We in the trade union movement spent a considerable amount of time arguing with our members about the legality, the right, the honour of a contract—sometimes, some might say, without a great deal of success. Sometimes we talked to the lads stating that we had reached an understanding with the employers.

They replied that that employer was a so-and-so, but, by and large—and most employers know this—a contract was a contract as far as we were concerned. I believe that, even in some of the worst days of my experience as a trade union man, while I might have been called all sorts of names, I was considered a man who would stick by his word to his membership. If I came to an understanding with an employer that something would be done for my members in respect of payment received, it was known that I would operate it.
Bearing that in mind, how can the Government expect to go to workpeople and say that the express purpose of Section 30 is to protect the employer against a breach of contract? How can the Government expect trade unionists to accept that employers are being told, "You need no longer observe the rate. In fact, you can go further"—in other words, if an employer has paid something and feels aggrieved about it or that there might be a danger concerning it, he can give a month's notice and say, "I will not pay it any longer".
This under a Conservative Administration would have resulted in an industrial dispute of the type not seen since 1926. The regrettable part about it is that the alternative is not to be found on the benches opposite. The alternative is not to say that the Conservatives have tabled a Motion of opposition to the Government's ideas and are asking us to vote for it. That is not the answer. That is not what we are asking. We are begging our own Government to see, before it is too late, that what they propose is not the solution to the kind of problems facing us.
Then we come to the prices bargain We are being told that prices have been controlled and the example of laundries has been given. I thought it rather nice to tell them, "Do not put any more on"—and the Government merely stopped them in their tracks six months after doing all that they could to equalise their costs, justified or otherwise. But it is not just laundries. Wherever one goes and spends money, one sees excuses for price increases. I mentioned some. The rates are another. We are told when we complain that if increases are not made the debt will accumulate and the additional


money will have to be obtained next time. In other words, we are caught both ways.
We accept that this is the kind of situation in which we live. Nevertheless, when we go into cafes and restaurants and see price increases or buy a roll of wallpaper and see stamped on the back "7½ per cent. for S.E.T. or Purchase Tax", we see that this money is being taken out of the pockets of the people, including the lower paid.
We talk of protecting the lower-paid workers. We should at the same time realise that they are the very first victims of price increases and of the Government's proposals. These are the people who, it will be recognised by hon. Gentlemen opposite, are often not covered by trade union agreements, so that we are not able to say that what has been done is in the interests of the lowly paid.
We begged the Government, through all stages of the main Measure and even before it was introduced, to say that we need to improve our economic position but that we do not need to stifle the workers to do it. Right hon. Members may tour the world obtaining information about technological advances and so on and may return saying that this or that is wrong, but I do not accept that we are an industrially down nation. Some things are not as good as they should be, but I suggest that we cannot for ever carry the tremendous unjustified defence burdens that we are carrying at present.
We must and could have some form of effective price control. We must have selective import restrictions, whether or not our partners in various parts of the world like it. It is difficult to see how anyone can justify the importation of things like fruit machines. I cannot understand why one should be told, "There is no such thing as a good English camera. We can show you seven different types of foreign camera, but the English do not make decent cameras these days". This state of affairs must be looked at if we are really facing the sort of economic problems which we are told we are facing.
There must, at the same time, be another important review of our world rôle as a currency. It seems to depend on what sort of mood the Chancellor of

the Exchequer is in as to whether he justifies it or tells us that we are at the mercy of the vagaries of the bankers here and abroad and whether they make a run on our currency. If we cannot afford to stand the risk of our economy being threatened, or becoming slightly wobbly, because of a run on our currency, we should look at the rôle of our currency in the world.
This House should know that if our economic ills are to be faced, if we are to get out of our present problems, one thing has to be remembered. The trade unions, representing the workers, and the employers must have a mutual confidence, and a mutual confidence in several things. One is confidence in the future of the economy. Another is confidence in the Government—they must have confidence in the Government. There must be confidence in the trade unions. And we all have to recognise that the problem of efficiency will not be dealt with in this House. I suggest that the introduction of Part IV diminishes the growing confidence that was being created between unions and employers, and between those two bodies and the Government.
I do not know how the other side feel about it, and I do not wish to—no, that is not fair; I do wish to know, but it does not come within the province of the comment I am about to make. I am a representative of a very large union, and of a large number of workers who want to help this country out of its economic difficulties. But those workers are not satisfied that the way to get them to do that is to tell them that they have no place in this except to be told by the Government. They are willing to be partners, but partners whose voice is heard, understood and respected, and a voice to which regard is given.
I suggest that during the passage of this Measure through the House, including Part IV, sufficient regard has not been given to the voice of the workers. I therefore beg my Front Bench colleagues, colleagues in my own Government, not to slip into a development of this idea of a Conservative solution of an economic problem that was left to us, but to try by every means possible to manage without the introduction of restrictive legislation, and to create a situation in which we can all work to improve the


economic situation and provide a brighter prospect for our country.

9.3 p.m.

Mr. Julian Ridsdale: I cannot possibly agree with the right hon. Member for Nuneaton (Mr. Cousins) that what we are discussing is a Conservative solution of our economic problems, but I do agree with him when he says that the only way to get out of our present difficulties is to encourage production and get growth in our economy.
The First Secretary asked what our attitude was on an incomes policy. I say to him at once that my attitude is that an incomes policy should be made to work, but made to work under voluntary conditions of fair competition, which can never be achieved with the present rate of Government spending. Having given the First Secretary that reply, I hope that he will lay before the House some of the evidence on which he made the Order on laundry prices.
I have one question about the freeze to ask the Lord President of the Council. While he was Minister of Housing and Local Government he promised many times to do something about the rates. Is this freeze to apply to rates? Are the Government to say that it will apply to rates? The only way in which they can say that is by taking the advice of the Governor of the Bank of England and restraining the rate of local government spending.
The new principle in this Order, which comes from the Act, is that we have now reached a position of totality and moved from the voluntary principle. The First Secretary of State and the Cabinet have as much power today over our economy as Hitler, Mussolini, de Gaulle, Franco, or even Cromwell had over running their economies. What I find profoundly disturbing is that from the Prime Minister downwards they have denied any intention whatever to bring in this kind of totality in place of the voluntary wage principle. The Prime Minister said on 20th July:
It is not our intention to introduce elaborate controls over incomes and prices."—[OFFICIAL REPORT, 20th July, 1966; Vol. 732, c. 636.]
What could be more elaborate than the powers which have been given to the First Secretary of State in this Order? It is no wonder that confidence has been undermined. When the Government first came—[Interruption.]

Mr. Speaker: Order. An hon. Member cannot speak against a background of conversation.

Mr. Ridsdale: When the Government first came into power they broke nine international treaties. We know that when the Government broke those treaties how much that undermined the confidence in the international field. Now the Government are forcing many employers to break their word, alas, especially over productivity agreements as well. Is it a wonder, therefore, that there is an air of doom and gloom in the country and lack of confidence? In cricketing terms, the Prime Minister is becoming the best long-stop in the country.
As my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) pointed out, in his election forum the Prime Minister said:
Once you have a law prescribing wages I think you are on a very slippery slope. It would be repugnant, I think, to all parties in the country. Certainly, I do not think anyone wants to go to the point of prescribing wages by law. As to the idea of freezing all wages and claims, salary claims, I suppose, dividends and rents … I think that would be monstrously unfair".
Many similar statements were made by the Chancellor of the Exchequer, the First Secretary of State and others. Let us realise that other countries have been down this slippery slope before. [An HON. MEMBER: "You are on the slopery slip."] We can see evidence if we wish to look for it of this kind of thing happening in other countries. Just as here the locals Harolds, the local Jims, the local Freds never thought to present any danger to the freedom of their countries, just as here the leaders of those countries pleaded with their people not to force them to take emergency powers, but, once taken, those powers are extremely difficult to get rid of.
These wartime-like restrictions prompt me to ask, "Is this journey back to controls really necessary?" Surely the Chancellor should have foreseen that the demand was bound to grow when the inflationary wage increases were given in 1965. Why did he try to restrain demand only by increasing taxation? Why has the Chancellor made no attempt to hold back the growth of Government spending? What has the Chancellor done about the warning of restraint given by the Governor of the Bank of England?


Why were not such measures taken in the spring before the summer freeze? I believe that if that had been done it would have been completely unnecessary to have the freeze. This is why I am such an opponent of Part IV.
What have the Government done on top of what was already a very high rate of Government spending? They have burdened the already well-laden Government machine with more spending loads. Unfortunately, a great deal of this is in long-term non-productive spending.
As the Financial Times said on 22nd October:
It is not the cut backs which may or may not materialise next year which matter most in this context, but what happens after 1967. Somehow or other the demand of the Government on the economy, whether expressed in terms of resources or the level of taxation, must be kept to a level which allows industry to expand".
It is because the Government have failed to do this that we have this totalitarian Act before us and against a background which makes the Government in the Order appear to be hostile to profits and even if they are secured they will merely attract even higher taxation.
I attack the Government for not having acted earlier to prevent such a severe totalitarian freeze as we now have. The danger is that Clause 4, while suppressing the temperature, will not cure the disease. Clause 4, combined with the deflationary—[HON. MEMBERS: "Part IV."] Part IV, combined with the deflationary measures which the Government have already undertaken, must mean a further cut-back in investment. For all the Prime Minister's easy talk about wishing to increase productivity, with such cuts not falling on long-term Government spending production is bound to suffer.
The Chancellor of the Exchequer is over-taxing us. The Order is making us over-governed. Only when we are completely rid of it shall we be able to go ahead again. We want, not the Order, but freedom in all its aspects—the freedom of the individual to invest and save his own money, the freedom of the merchant and the manufacturer to compete in markets where there is fair competition, the freedom of the consumer to be protected by fair competition from big

monopolies, be they State- or privately-owned—to be protected by fair competition, but not by the Order.
This places on the Government an obligation to ensure that there is fair competition in the British market. How can any Government do that who are spending at the rate they are at present in proportion to the national wealth?
This kind of economic policy, buttressed by the Order, puts all our freedom in danger, and it is because of the threat to our personal freedom, the threat to the freedom of our free economy, that I oppose the Order with the utmost vigour.

9.13 p.m.

Mrs. Margaret Thatcher: The seriousness of the Order makes this one of the most important debates we have had in Parliament. It has been alleged that we on this side of the House are making blandishments towards the trade unions. Let me make our position quite clear. The powers contained in the Order invoke principles which go far wider than even the trade unions and it is to those principles that we mainly direct our attention.
My right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) drew attention to one of them at the very beginning of the debate, and it is the subject of one of the Orders which we are debating, namely, the fact that the very day the Bill became an Act the whole of Schedule 2 was taken out and replaced by another Schedule without any reference back whatsoever to Parliament. Moreover, that Schedule had been the subject of extensive discussion in debates in Committee and many attempts had been made to amend it. All of those were rejected, but then a number of the arguments were impliedly accepted because the entire Schedule was removed.
This is no way to treat Parliament. It is quite the wrong way in a Bill which contains the far-reaching powers which this one does. One of the side-effects of replacing that Schedule has already been mentioned. But it is difficult to see precisely what that side effect is. The new Schedule has some comments and restrictions on dividends which the old one did not have, and I think that this is what has led to the confusion about the position over dividends. The old Schedule made very little reference to dividends,


except to say that dealing with them would be left to fiscal policies, and that as profits were falling away dividends were not expected to rise.
The new Schedule is very much stricter in its approach, and I can understand why some confusion has arisen as to whether or not there is power to control dividends. I do not believe that there is, but in the absence of power the Government are using some extraordinarily autocratic language. For example, the Schedule says:
Nevertheless all company distributions, including dividends paid by companies, are subject to the standstill and should not be increased during the twelve-month period, …
It adds:
If there are any cases which, in a company's view, make exemption from the standstill imperative, the company will be expected to inform the Government of the circumstances, in order that the justification may be examined".
This is what was put into the Act without any reference back to Parliament. It may well be that in the approaches which the Treasury is now making concerning the odd dividend which is in excess of that paid last year, it is using the new Schedule, and pointing out that if the company did not comply with the Government's wishes the matter could be referred to the Prices and Incomes Board, with the inevitable 30-day reference and possibly a three months' standstill. Whether or not one agrees with increasing dividends, it is wrong that such a power should be uncertain and imported into an Act in that way.
I now turn to the subject of price control, which has been raised by many hon. Members. The voluntary freeze has had far more success in holding down prices than in holding down incomes, and this very success has often endangered the balance of payments, because there has been excess money which has, as my right hon. Friend the Member for Flint, West (Mr. Birch) has often said, sucked in extra imports. It is important to note that the voluntary effort has had this considerable success in holding down prices, even though most of the increased costs have been directly imposed by the Government.
It sticks in one's gullet that when the Government impose costs they should then indicate to people that they should report increased prices to them. It is as

if the Government are trying to escape responsibility for having been the cause of the increased costs. When the First Secretary appealed to housewives to report increased prices I am sure that most of them thought that they were not asked merely to report unjustified increases. They have been reporting any increases and thinking that the First Secretary would put the prices down, when, in fact, he and the Government have been the cause of putting them up.
My hon. Friend the Member for Harwich (Mr. Ridsdale) mentioned rates. In the guidance which the Government have given to the C.B.I., and which has been sent out to all members of the C.B.I., increases in rates are not allowed to count towards increased prices. They are not one of the defences for having to put up prices. This is wrong, for rates are just as much a form of taxes as central Government taxes. If prices are too high, the Government can draw public opinion's notice to them. On the one occasion when there has been a reduction in prices this is exactly what occurred, and no far-reaching Part IV powers were needed.
The First Secretary of State will remember that, when a 2d. in the £ surcharge on fruit and vegetables was mooted, the effect of public opinion was enough to reduce that surcharge down to 1d. It did not need the powers the right hon. Gentleman is asking for today. It was done without them.
On the general question, "Can prices be controlled?", whenever this is put as a straight question to the Government or to one of their spokesmen the answer is always to sidestep it. It is sidestepped for the very good reason that the real answer is, "No". There cannot be a complete system of price control in any economy. The reasons are not far to seek. It is so easy to have new products. New products are coming on the market all the time. There is a wide range of goods on which it is impossible to control prices.
Clothes account for quite a large proportion of the average family's expenditure. I defy the President of the Board of Trade or even the First Secretary of State to put a price control order on costs from July over to January. For a start, fashions have changed. One cannot control the price of a garment which


has a mini skirt in July, but a skirt four inches below the knee in January, I doubt very much that the President of the Board of Trade would even notice the difference. I think that he is, perhaps, rather more interested in the other type of figure, the sort one finds in statistics in books, though I would not necessarily apply that comment to other members of the Government.
There cannot be a system of complete price control. My contention here is that one can do exactly what one wants by applying the force of public opinion to increases which are regarded as unwarranted. There is no need for extra powers, powers of the kind which the Government now intend to take.
The Government have already laid an Order to deal with laundry and dry cleaning charges. It is very strange that this should be their first selection. My right hon. Friend the Member for Enfield, West mentioned the 300 complaints that had been received. That is a comparatively small proportion. Considering that there are 5 million laundry bundles each week and that over 50 million single articles laundered, I should have thought that 300 complaints was a very small proportion indeed. But there is another point about the Order. The laundries have gone along with the Government in all the co-operation which has been required of them. They have been to the National Board for Prices and Incomes, which held that an increase of 4 to 4½ per cent. was warranted because of the Selective Employment Tax. They then discussed with the President of the Board of Trade the implications of that Report. Yet, having co-operated as they were required to do, they are the first to have an Order upon them.
My information, which comes from the Daily Telegraph, is that of the complaints examined many have already been found to be unjustified. Against this background, it is very difficult to resist the interpretation that what the First Secretary of State wanted was a sort of quid pro quo: if he make an Order or thinks of giving notice with regard to earnings, he must do something and make one with regard to prices. We do not accept that as a valid reason at all.
I turn from that subject to what is, perhaps, the nub of the powers, those relating

to earnings. One of the reasons why the freeze has been comparatively successful to date is that most people, or, rather, many people think that it is already absolute and there can be no increases whatever. This, of course, is nonsense. There is nothing illegal in putting up wages or salaries now. The employer is free to give a rise. The employee is free to ask for one.
A good deal of nonsense has been talked about loyalties and about selfishness in connection with the powers which the Government propose to invoke.
There is a very real conflict of loyalties here. Those who want to co-operate with the Government also have a primary duty and obligation to those whom they employ. I know that those who are primarily concerned with the debate today on the Government Front Bench may not have had a great deal of experience of working in industrial concerns, but there is, as hon. Members on both sides have said, a very real mutual respect and trust which has to exist if any business is to flourish.
The respect exists both ways. It is the respect of the managers and employers for the workers and vice versa. One often hears it said, "He would never let me down." That is the kind of faith that can be built up in small and medium and, indeed, large organisations.
What happens when the Government try to persuade people to break their contract? There is nothing wrong, in an employer keeping an agreement indeed I would say that it is his first duty, towards his employees. I reject entirely the Government's definition of the public interest. The public interest is a very easy excuse to use in support of anything, particularly if one has not got a better excuse and if one does not really analyse exactly what is meant.
I notice that the Attorney-General had some comments to make about this on the Report stage of the Prices and Incomes Act. I will read his comments, but I utterly reject them:
… the compulsory powers will be introduced only if there is evidence that certain elements in the community have fallen short of their public duty and have chosen, by an attitude of recalcitrance, to challenge the policy which the Government feel is in the best interests of the nation at this time."—[OFFICIAL REPORT, 9th August, 1966; Vol. 733, c. 1439.]


It would be bad enough if any right hon. or hon. Member said that, but for the learned Attorney-General to insinuate that we cannot even challenge the policy and that when the Government tell us that something is in the public interest we must accept it, is something that I never expected to hear in this House. I reject this attitude utterly. It is more in the public interest that an employer should keep his agreements with his employees than that he should break those agreements.

Mr. Roy Roebuck: Is the hon. Lady familiar with the play, "The Merchant of Venice", in which someone insisted on a contract to get a pound of flesh, but the blood ran out of the body?

Mrs. Thatcher: I do not think that that is a relevant or helpful interjection. I believe that it is more important and in the public interest to keep faith with those who keep faith with one. It represents a far better attitude for the future.
One must remember that companies and enterprise will go on producing goods both for the home market and for export long after those who are putting forward this Order have left the Government Front Bench. These things will go on for a very long time. One must consider the effect of what the Government are directing employers to do now on the whole of the future of labour relations. Labour relations would in future be far better if employers insisted on keeping their agreements than if they break them. If the Government had had their way, the Acrow agreement would have been broken. It seems strange that the Minister of Labour should go around asking people to return to honesty and thrift while, at the same time, telling them that it would be honest to break their contracts. It is ridiculous.
A number of productivity agreements have already suffered. According to the Financial Times, the firm of J. S. Fryer and Sons, of Bristol, had to unscramble its productivity agreement and reintroduce over-manning because it had to go back on what it had previously agreed. This seems to be quite wrong. Once there is an atmosphere of freeze, and freezing of wages, all sorts of other attitudes are frozen. The whole attitude

towards progress becomes frozen—none is made—and the whole attitude towards increasing work becomes frozen, and that is the kind of attitude with which we shall have to live for a very long time if companies do what the Government are asking them to do.
A number of reasons and explanations have been offered for the Order. None of them holds water. I refer now to those cases in which there were in existence agreements by which the employee had a right to increased pay before 20th July, but had not in fact been paid it on 20th July. The right hon. Gentleman the Member for Nuneaton (Mr. Cousins) referred to similar agreements in which the right had vested, but the mechanism had not worked to get the pay into the pocket. The Government are invoking fairness in support of their policy, but the position at which they have drawn the line for these agreements is completely and utterly unfair and quite untenable. What they have done is not to consider whether a person had the right and whether the right had been vested, but have drawn the line merely by the accident of whether the administrative arrangements had got the pay to the pocket.
It is quite absurd that one person who had the right to increased pay on 1st July and who got it should be all right under the freeze, but that another person, who had the right for the same week but who did not happen to have been paid, should be prevented from getting that increase, or asked not to have it, for the whole period of six months. If the Government draw the line in that way, they cannot then plead fairness for their policy, because by its very nature and by their own choice their policy has been unfair.
Then it is said that present agreements cannot be honoured because that would create two different classes of people, those who have agreements and those who have not. But by virtue of the Government's policy there are already created two different classes of people. Perhaps one or two examples will make this clear. Doctors' pay stemmed from the Report of the Review Body in April, 1966. That Report proposed increases for doctors in general practice, hospital doctors, hospital dentists and dentists in general practice. It so happens that the dentists in general practice got their increase before 20th


July and can, therefore, have it, while none of the other three, who were to have their increases by virtue of the same Report, happened to get them. They have been told that they cannot have them for a period of six months and so, by their own policy, the Government have created two classes of people, those whose increases were implemented and those whose were not.
The Government have also created two classes during the period of severe restraint. During the Committee stage of the Bill a number of undertakings were given about what would happen in the period of severe restraint and I hope that no one will try to go back on them as certain other assurances have been gone back on. Again, I refer to those cases in which agreements were in existence and increases were due, but not paid, at the time the Government announced their policy of freeze.
The Solicitor-General said that as soon as the standstill period came to an end a contract would have full force and effect as if there had never been a standstill period, so at that stage the worker would not lose anything. All he would lose would be the increase, however it might be calculated, during the standstill period. That means that those who had agreements will go back on 1st January to exactly the same position as they would have been in had there been no standstill, and any criteria which are to operate in the period of severe restraint will not relate to them because of this prior undertaking given by the Solicitor-General and reported in col. 744 of the OFFICIAL REPORT of the debate on what is now Section 30 and given quite firmly.
The learned Solicitor-General was not a member of the Committee, but attended in a very special capacity to give advice to the Committee about the legal effect of provisions. I hope that there is no question whatever of that assurance being revoked.

Mr. Atkinson: One contradiction in the hon. Lady's argument relates to the doctors. The doctors' increases will take place from 1st October. It is not, as she is now pointing out, that the salaries were frozen for six months; they were frozen for three months and the increases start on 1st October and will be paid on 31st

December, which is a six-month period. But they are back-dated for three months.

Mrs. Thatcher: The hon. Gentleman is reinforcing my argument. From 1st January it will be operated for those who had agreements. My understanding of the doctors' situation is that they were due to have their pay on 1st April, it was frozen for six months, which brings it to 1st October. They did not get it paid on 1st October, and what they are due to receive from then onwards will be paid on 1st January. The same system will operate with anyone who had agreements under which pay was due before 20th July. The increase will be suspended for six months, but at the end of that period it will be accumulated until 1st January and then paid.

Mr. Atkinson: Mr. Atkinson indicated dissent.

Mrs. Thatcher: The hon. Gentleman shakes his head. He had better read what the Solicitor-General said at col. 744. It was a quite firm undertaking.
It is absolutely wrong for the Government to expect or to ask two parties to a contract to break that contract and, in particular, to expect an employer to rat on his employees. We are clearly not alone in this view. It was extremely well put the other day. Let me quote:
The disagreeable fact is that if the Government or Parliament undermine the sanctity of such contracts, the sense of obligation in regard to contracts in general is bound to deteriorate. It is not simply that if employers are to be asked to repudiate their agreements with employees, the latter can hardly be expected to treat their own agreements, whether collective or otherwise, as invariably binding but that those entering into commercial agreements fear that they too may be exposed to Government interference in their contractual arrangements".
In other words, the Government are undermining everything with regard to the sanctity of contracts. The words I quoted are from a former Labour Attorney-General, now Lord Shawcross. [Interruption.] That was during a period when a Government did not ask for compulsory powers of this sort. Perhaps they would not be asking for them now if they still had the noble Lord as Attorney-General in the Government.
The Government have received a great deal of co-operation from employers and employees. Any success that they achieve is much more likely to be achieved through the continuance of voluntary


co-operation rather than through an Order of this kind. Very detailed instructions have been given to the Confederation of British Industry, and it has circulated them. In some cases the instructions have been so pernickety that they are indicative of the kind of bureaucracy that we should get if Part IV were invoked. I think that some of the instructions have gone much too far. For example, employers have been asked not to pay increased pensions during the standstill. [HON. MEMBERS: "Shame."] It seems that that goes far beyond anything which can be expected during the period of freeze. Employers have also been told that those companies which exercise their discretion about increments, in other words, those who consider increments every year, should not agree to increases, but that if regular increments are in an agreement, then they can be paid.
The provision which I thought was particularly pernickety was that companies were told by the Government that where the payment of a Christmas or similar bonus had been within the management's discretion it should be regarded as caught by the standstill. This is what the Government were asking for under a voluntary freeze. It was getting as petty-minded as this under a voluntary freeze. The kind of bureaucracy which we shall get under a compulsory freeze is awful to contemplate.
One of our contentions which has been mentioned by a number of hon. Members is that no case has been made out for a compulsory freeze or this Order. If the Government ask for a compulsory freeze, it is up to them to make out the case for it and the case should be established overwhelmingly and beyond all reasonable doubt. We do not have to make the case against it. But no overwhelming case has been established for this freeze.
Even the Chancellor of the Exchequer, when he was at The Hague on 25th July, said that the pay freeze was not essential to the success of the squeeze, and went on:
The prices and incomes part of the package should, therefore, be viewed as 'a bonus on top of it all'. While the Government meant it to succeed, the Chancellor said, 'We would not be all at sea again if it failed'".
That was the Chancellor of the Exchequer blurting out the truth outside

this country. If he does not think that there was a good case for it, how much less should hon. Members opposite back up his present request.
There are one or two other general considerations on Part IV. It is a much more far-reaching part merely than making compulsory the earlier parts of the Bill. During the Second Reading debate on the Prices and Incomes Bill, my right hon. Friend the Member for Barnet (Mr. Maudling) forecast, as he has often forecast before, that the Government would eventually bring in an Order giving them compulsory prices and wages powers. But even he did not envisage the kind of powers which the Government propose to take. Even he thought that if the Government wanted to make them compulsory they would make the decisions of the Prices and Incomes Board binding.
That is quite different from Part IV. Part IV by-passes the Prices and Incomes Board completely and gives blanket powers to the First Secretary of State or to certain other Cabinet Ministers. These may, assuming the Order goes through, be legal, but they are so arbitrary that they are certainly not within the spirit and meaning of the phrase "the rule of law".
It would have been very easy to have gone through this debate merely giving quotations from the Government Front Bench spokesmen. The Chancellor of the Exchequer, who has just arrived in the Chamber, made an excellent speech on a voluntary pay pause in 1961. He tendered a good deal of advice in that year to the Labour Party conference. He said:
In Ernie Bevin's day at the Ministry of Labour, of course, if there was one thing he insisted upon … it is this, that we, too, should regard wage agreements as inviolable, we, too, should regard them as sacrosanct; we have had to keep our share of the bargain as well. But now, of course, we have not got Bevin at the Ministry of Labour. … Instead, we have not a rock but a rather good-natured well-meaning 'hare', someone who is a 'wee timorous beastie' who has been chased into a corner by the Chancellor of the Exchequer".
I wonder whether the present Minister has been chased into a corner, not by the Chancellor of the Exchequer, but by the Prime Minister. I do not believe that the Minister of Labour, of his volition, would bring forward this Order today. If there


were a free vote, I have a fairly good idea which way he would vote.
The Chancellor ended that tremendous speech with a message to the whole of the Labour movement. He went on to say that
the only safety for these workers, whether they be industrial workers in Government establishments, whether their conditions are determined by wage councils, whether they be white collar workers, is in the return of a Labour Government at the earliest possible moment".
When the Labour Government came into power, what those workers got was not a voluntary freeze, but a compulsory freeze.
The former First Secretary, now Foreign Secretary, stumbled again on the truth when he said on 11th May last year to us on this side:
It is time some hon. Members opposite made up their minds whether they believe in a free society and consultation and discussion or in a totalitarian society with the right to direct and control."—[OFFICIAL REPORT, 11th May, 1965; Vol. 712, c. 296.]
We on this side have made up our minds about this important topic and we shall be showing it in the way we vote tonight.
I understand that the Leader of the House will reply to this debate. He and I have debated together on many occasions, for longer than I care to think. For a time I was at the Ministry of Pensions and he was always talking on pensions from this side. Then he went to housing. I followed him "shadowing" housing. Now, somehow, he has come right out of his present position and is replying on an economic subject.
We are all used to the right hon. Gentleman's ebullient, effervescent style. It is always extremely attractive. It is often something of an Oxford Union style. [Laughter.] I assure hon. Members that I am making no blandishments. The right hon. Gentleman has the kind of style which sounds tremendously impressive and which is most agreeable to listen to, but I find that one never believes a word of what he says because one knows that he is quite capable of making just as attractive an ebullient and effervescent speech tomorrow entirely contradicting all he has said today.
The right hon. Gentleman made a speech on this topic the other day at Coventry. Knowing his style, I assumed

that it must have been an "off-the-cuff" speech, because I know how the words and the language flow. But this is what he said:
The July measures"—
he was referring to the deflationary measures and the compulsory freeze—
were not a last-ditch defence of Government policy, but a last-minute dash for freedom, a breakthrough into new patterns of industrial relations"—
Well they will certainly be new patterns!
and new experiments in co-operation between State planning and collective bargaining".
When I read that, I thought that it was probably one of his "off-the-cuff efforts", but it was not. That makes it much more serious than if it had been. It was a Press release and, therefore, the Leader of the House had considered extremely carefully what he intended to say. I can only say that I thought it was one of the most calculated pieces of cynicism that I have read for a long time.
The Order which we are discussing is no dash for freedom. It is the first step on the journey to coercion, and it should be rejected.

9.49 p.m.

The Lord President of the Council and Leader of the House of Commons (Mr. Richard Grossman): I am grateful to the hon. Lady the Member for Finchley (Mrs. Thatcher), in that vigorous and attractive speech, for reading aloud a passage from my Coventry oration with such emotion and feeling. All I can tell the hon. Lady is that, in the course of what I have to say, I shall seek to explain why that was a sensible and constructive observation.
Before I come to deal with what the hon. Lady said, I wish to relieve the mind of the right hon. Member for Enfield, West (Mr. Iain Macleod) about the question of the London Gazette. As Leader of the House, I have taken it up for him, and I admit that he had a reasonable ground in pointing out that in the new situation, where these Orders are important, it is not wholly satisfactory to have the London Gazette reaching the Library on Tuesdays and Fridays and filed in the Reference Room. As an alternative, I propose to ask the Departments concerned to arrange for a copy of each Order, as it comes out, to be sent to the Library immediately, where it will be treated as a deposited


paper and made available to hon. Members in the Oriel Room. Such Orders will be indexed in the Parliamentary Index and readily identifiable for hon. Members. I think that that is better than taking the London Gazette, photographing it and repeating it. I am grateful to the right hon. Gentleman for bringing the point to my attention.
Having said that, I want to take up one or two of the things that the right hon. Gentleman said. The first of the charges made against us was that we forced this totalitarian Measure down the gullet of the House of Commons.
Looking back at what happened and at our proceedings, I find that charge one of the most puzzling which our opponents make. I think that it was made by the Leader of the Opposition at one stage, when he said that Parliament had been steam-rollered to provide this authoritarian Government with the dictatorial powers that they demanded. However, it should not be forgotten what happened to the Prices and Incomes Bill last July. The Committee stage lasted 47 hours, and the Second Reading recommittal, Report and Third Reading on the floor of the House took a full five days. The striking fact about the Bill is that it went through the House without the introduction of the Guillotine and without a Closure ever being moved. As a result, I find it difficult to understand how the Opposition can complain that they were steam-rollered.

Mr. Carlisle: Would the right hon. Gentleman tell the House whether Part IV was in the Bill when it had a Second Reading?

Mr. Crossman: I have given the hon. Gentleman the full amount of time spent and pointed out to him that it is very rare to have a Bill of this kind, of a highly controversial—[HON. MEMBERS: "Answer."]—I have told him that it had to be recommitted. We spent a day on that, and the total time spent, including Part IV, was that time. All I say to the Opposition is that it is slightly idiotic to suggest that it was stream-rollered over them, when it went through without a Closure or Guillotine.
I come now to whether its content is totalitarian—[Interruption.] I think that right hon. and hon. Gentlemen want to get on to a vote, and I do not wish to detain them any longer than necessary.

Several Hon. Members: rose—

Mr. Speaker: Order. Since the right hon. Gentleman obviously is not giving way, there is no point in persisting. The Opposition Front Bench spokesman has been heard in comparative silence, and it is only fair to ask the same for the Government Front Bench spokesman.

Mr. Crossman: I will ask right hon. and hon. Members for tolerance. I have a lot of points to answer which have been made in the course of a long debate, and it is only fair to give answers to those people who have been here to make their speeches in the course of the debate.
One of the points made time after time was about what was called the totalitarian nature of the Bill. In fact, we took the greatest trouble to see that Part IV as well as Part II could be brought into force only with an affirmative Order, and that would mean a day spent in the House.
A criticism from another point of view is that, under Part IV, it is clear that one can only act in specific cases. The aim of Part IV is to maintain a voluntary freeze, with reserve powers which we held as long as we could in reserve and which, even now, cannot actually be operated without special Orders in each case. It is therefore absurd to say that we have any desire to do this.
I turn now to what my right hon. Friend the Member for Nuneaton (Mr. Cousins) put to me. I listened to him with close attention, and I think that what he said represented, as it nearly always does, what a great many people are feeling and thinking, and deserves very careful consideration and answer. His central theme was that it is the Government's aim to take over and to control the whole of the incomes front. It is not the Government's aim to do so. When he said that he wanted every employer and trade unionist to get together and make a new approach, I agreed with him, because this is precisely what the Government want them to do, and I hope that that is what the other side wants, too.
What we have to consider is not whether that is wanted, because everybody wants that. What we have to consider—and here we can disagree—is whether this Measure assists or prevents the new approach and the new get-together, and whether we could have got through the crisis without it. Those are


the two essential problems with which I want to deal.
My right hon. Friend said that efficiency cannot be ordered and made from this House. Of course efficiency cannot be made. Of course workers cannot just be told. I think that we agree on all the points that my right hon. Friend made along those lines. The difference therefore is not about the aim. The difference is about whether this Measure was necessary, and whether it will assist or damage the kind of relationship, and the kind of new incomes and prices policy, which we all hope both sides of the House want to achieve.
Was it necessary? The hon. Lady the Member for Finchley made this point and challenged me to answer it. We have to prove the necessity for a Measure as unprecedented as this, and giving these new powers, and I therefore ask myself how I can summarise the necessity for it. I thought that my right hon. Friend the Prime Minister put it very clearly in his Blackpool speech, and I think that my right hon. Friend the Chancellor of the Exchequer put it very clearly at Brighton.
The case for the Bill has been made time and again, and I will make it simply by quoting the essential facts which forced this Measure on us. The essential fact was recorded in both those speeches, and it was that in the 12 months ending April, 1966, average hourly earnings rose by 10 per cent., while the average rise in productivity was about 2 per cent. It was this fact which forced our action in July, and what we have to concern ourselves with here is to ask what would have happened if we had not taken this step.
The second thing is that in a sense we are now half way through the first six months, and in a way we can claim—and I think that my hon. Friend the Member for Stoke-on-Trent, South (Mr. Ashley) made this point—that to some extent our action has been justified by the acceptance of its necessity by a great many people in this country.
I think that many years before this Government took office, there was a sense that there was a phoneyness in the relationship between prices and wages, a sense that we were living in a phoney world, and that something drastic had to be done to deal with it. I should

have thought that that was a common feeling and that anybody who studied public opinion would be aware of it.
It centred round the problem to which the right hon. Member for Leeds, North-East (Sir K. Joseph) referred yesterday. It centred round the problem of how to deal with inflation under full employment. It is very easy for hon. Gentlemen opposite to jeer and say that we failed to deal with it. Let us be frank about this. Every Government since 1945 have failed to deal with the problem of inflation under full employment. It was the central problem of the economy. The problem which the right hon. Gentleman defined as the problem of getting demand right, and which my right hon. Friend the Member for Nuneaton once described as the problem of achieving planned growth earnings, is the same as what my right hon. Friend the Prime Minister once defined as ensuring that productivity and earnings keep level in their advance.
We are talking about the same central problem. The only point I am making is that our predecessors failed. Indeed, I would go further and say that the first Labour Government, the Crippsian policy of austerity and voluntary wage freeze, failed. The three Conservative policies in their three crises all failed. There is a long history of failure to deal with this situation by good intentions and by moral lectures.

Sir Keith Joseph: The right hon. Gentleman is seeking to show that in July a price freeze, voluntary or compulsory, was necessary. Why, then, did the Chancellor of the Exchequer say that it was unnecessary and a mere bonus?

Mr. Crossman: He certainly did not say that it was unnecessary. I should have thought that this was the last thing of which the right hon. Gentleman can accuse the Government. He cannot accuse us of thinking that this is unnecessary.
I should like to look at this one point on which both sides of the House may possibly reach some kind of agreement—that there is a problem which either justifies or does not justify Part IV. Let me try to analyse the problem precisely. My right hon. Friend the Member for Leeds, West (Mr. C. Pannell) referred to this when he spoke about unemployment, and I shall say something more about


that later. He rightly said that we were brought up before the war with an attitude among the Establishment that unemployment was endemic in the country's economic system, something which could not possibly be avoided. The revolution which came was when someone taught that unemployment could be removed from the system by creating demand. What none of us asked then was what we did in a period when we had got rid of unemployment.
I suggest to the House that the problem which we now face in a full employment economy, is how to achieve four things simultaneously—full employment, steady economic growth, a fair distribution of the results of our labours, and a satisfactory balance of payments. The truth is that ever since we established full employment after the war, this ideal combination has never been achieved for more than a few months on end. This, I think, the Opposition must admit to have been their biggest single failure.
Indeed, one can go further. Let us look, for instance, at what one acknowledged expert said, analysing this problem:
Surely all the experience of the last twenty years in this country and overseas shows that if wage and salary levels and profit margins are always to be pushed to the limit that can be achieved by the sheer force of trade unions or by limited opportunism of management, then I say again that the result must be a choice between inflation or Government policies designed to curtail inflation at the cost of growth".
That was his analysis. This expert then added,
The country cannot achieve success nor can 'stop-go' policies be avoided if this compact cannot be made between the three main partners in our economic life."—[OFFICIAL REPORT, 3rd April, 1966; Vol. 675, c. 476.]
—by which he meant the trade unions, the employers, and the Government. That expert was the right hon. Member for Barnet (Mr. Maudling) when he was Chancellor of the Exchequer. There was a time when the Opposition understood the nature of the problem. Indeed, they understand it perfectly well now and they well know that it is the central problem.
Another thought about the problem: why is it particularly difficult? It is difficult because of something which none of us foresaw. When there was full employment it was not simply that the trade

unions were liberated from an inferior position in bargaining but that they could ask for higher wages and employers could give them because they could make additional profits out of the increased prices which we paid. So one has a vicious circle of inflation being created and it is the breaking of that circle that we must achieve if we are to have steady growth and, at the same time, a fair distribution without inflation.
It is perfectly true, as we all know, that we must, therefore, have an incomes and prices policy. We tried it with a statement of intent. That was not sufficient. We then moved on to the second stage, of trying Part II, which was the Incomes and Prices Board with an ultimate appeal and sanction. Before that was complete we had the crisis and found ourselves compelled, as a short-term measure and as an expedient, to introduce a total, overall standstill. This we did.
The reason why it worked was because it was overall—because it dealt with prices as well as wages—because it held the position overall. That is something one can do only for a few months. Naturally, the part of the Act in which these powers are taken must be temporary, a mere expedient, because one cannot hold the position indefinitely. We know that we can hold it relatively absolute for the first six months—followed by the second six-monthly period—but after that the Act will disappear and all these powers will go. In the period of 10 months we must have solved the problem which hon. and right hon. Gentlemen opposite failed to solve during 13 long years and which the previous Labour Government failed to solve. If we do not solve it the only alternative is to use unemployment as the method to cure inflation. [Interruption.]
This brings me to the last point I wish to make, which is the Government's attitude towards unemployment. This matter was put to me strongly by my right hon. Friend the Member for Nuneaton and my right hon. Friend the Member for Leeds, West. They both asked, in effect, "Does this mean that you have gone back on your principles of full employment; that you are accepting unemployment as endemic and that it is something that must always exist in the economy"? It is a fair question


and the answer I have to give on behalf of the Government is simply that the whole purpose of the present drastic operation and our sole concern is to create conditions whereby we can have full employment and sustained growth. That is something we must achieve. If we cannot do this we will stand condemned—[Interruption.]—as did hon. Gentlemen opposite when they failed.
This is the test to which every Left-wing British Government must be subjected; can they solve this problem and get a planned economy with a rôle for wages, prices and incomes? To achieve it there must be co-operation between the unions, the employers and the Government as the representatives of the public. Can they work together and achieve a solution?
With Part IV we have won for ourselves a breathing space, but it is not a permanent solution. It is a very blunt instrument and there may be many injustices, but it gives us 10 months and we will be judged by the final solution we produce.

The Parliamentary Secretary to the Treasury (Mr. John Silkin): rose—

Hon. Members: No.

Mr. Speaker: Order. I understood that the right hon. Member for Nuneaton (Mr. Cousins) was trying to ask a question before the right hon. Gentleman the Minister sat down.

Mr. Cousins: As my right hon. Friend said that the Act would disappear at the end of a year, will he say under which Section that action will be taken, since a Minister made it clear last night that the Act would continue indefinitely.

Mr. Crossman: I am afraid that there is no question of that. The Act stays, but Part IV lapses automatically on 11th August last year—[HON. MEMBERS: "Next year."] My point is that what we have gained is 10 months in which we will have time to work out a permanent policy, because there is no question that Part IV ends, and it is only as an interim Measure that we ask the House to approve it tonight.

Mr. Edward Heath: I am not quite sure whether or not the Lord President

has finished his speech, but I wish to put one question to him. We have listened to what he has said about unemployment with great interest. Is he now repudiating the Prime Minister's statement that after redeployment a level of 1½ per cent. or 2 per cent. is acceptable to the Government? Can we have a clear answer on that point?

Mr. Crossman: The statement which my right hon. Friend the Prime Minister made—which, I think, was repeated by the Minister of Labour yesterday—was that the level of 2 per cent. mentioned was not, of course, the level for any particular week during the winter, but the level after the winter was over. It was not, of course, a statement that this was to be regarded as a permanent norm but something we would accept for the period before we get the improvement of the economy going once again.

Mr. Heath: rose—

Mr. Crossman: Is that clear?

Mr. Heath: No.

Mr. Crossman: Then I will repeat it. This is not the figure for any particular week in the winter—we might have a bad freeze—[Laughter.] It is the tolerable figure for the period during which the economy is stable and before the big expansion expected develops. But once the expansion begins we shall not, of course, be content with a figure of 2 per cent. That is something which my right hon. Friend the Prime Minister made perfectly clear.
I cannot understand that there can be any doubt about what it means. It means that during this year ahead we have two stages; first, we have the stage of severe restraint from 1st January, when we have to work out the priorities, and then we have to be ready with the final solution. I am confident that when this Order is looked at in retrospect we shall find that we have demonstrated that this was a justified expedient which we needed in order to get the time.

Hon. Members: Resign.

Question put:—

The House divided: Ayes 307, Noes 239.

Division No. 178.]
AYES
[10.12 p.m.


Abse, Lee
Ennals, David
Loughlin, Charles


Albu, Austen
Ensor, David
Luard, Evan


Alldritt, Walter
Evans, Albert (Islington, S. W.)
Lyon, Alexander W. (York)


Allen, Scholefield
Evans, Ioan L. (Birm'h'm, Yardley)
Lyons, Edward (Bradford, E.)


Anderson, Donald
Faulds, Andrew
Mabon, Dr. J. Dickson


Archer, Peter
Fernyhough, E.
McBride, Neil


Armstrong, Ernest
Finch, Harold
McCann, John


Ashley, Jack
Fitch, Alan (Wigan)
MacColl, James


Atkins, Ronald (Preston, N.)
Fletcher, Raymond (Ilkeston)
MacDermot, Niall


Bacon, Rt. Hn. Alice
Fletcher, Ted (Darlington)
Macdonald, A. H.


Bagier, Gordon A. T.
Floud, Bernard
McGuire, Michael


Barnes, Michael
Foley, Maurice
McKay, Mrs. Margaret


Barnett, Joel
Foot, Sir Dingle (Ipswich)
Mackenzie, Gregor (Rutherglen)


Baxter, William
Ford, Ben
Mackie, John


Beaney, Alan
Forrester, John
Mackintosh, John P.


Bellenger, Rt. Hn. F. J.
Fowler, Gerry
Maclennan, Robert


Bence, Cyril
Fraser, John (Norwood)
McMillan, Tom (Glasgow, C.)


Bonn, Rt. Hn. Anthony Wedgwood
Fraser, Rt. Hn. Tom (Hamilton)
McNamara, J. Kevin


Bennett, James (G'gow, Bridgeton)
Galpern, Sir Myer
MacPherson, Malcolm


Binns, John
Gardner, Tony
Mahon, Peter (Preston, S.)


Bishop, E. S.
Garrett, W. E.
Mahon, Simon (Bootle)


Blackburn, F.
Garrow, Alex
Mallalieu, J. P. W. (Huddersfield, E.)


Blenkinsop, Arthur
Ginsburg, David
Manuel, Archie


Boardman, H.
Gordon Walker, Rt. Hn. P. C.
Mapp, Charles


Boston, Terence
Gourlay, Harry
Marquand, David


Bottomley, Rt. Hn. Arthur
Gray, Dr. Hugh (Yarmouth)
Marsh, Rt. Hn. Richard


Bowden, Rt. Hn. Herbert
Greenwood, Rt. Hn. Anthony
Mason, Roy


Boyden, James
Griffiths, David (Bother Valley)
Maxwell, Robert


Braddock, Mrs. E. M.
Griffiths, Rt. Hn. James (Llanelly)
Mayhew, Christopher


Bradley, Tom
Gunter, Rt. Hn. R. J.
Mellish, Robert


Bray, Dr. Jeremy
Hamilton, James (Bothwell)
Millan, Bruce


Brooks, Edwin
Hamilton, William (Fife, W.)
Miller, Dr. M. S.


Broughton, Dr. A. D. D.
Hamling, William
Milne, Edward (Blyth)


Brown, Rt. Hn. George (Belper)
Hannan, William
Mitchell, R. C. (S'th'pton, Test)


Brown, Hugh D. (G'gow, Provan)
Harper, Joseph
Molloy, William


Brown, Bob (N'c'tle-upon-Tyne, W)
Harrison, Walter (Wakefield)
Moonman, Eric


Brown, R. W. (Shoreditch &amp; F'bury)
Hart, Mrs. Judith
Morgan, Elystan (Cardiganshire)


Buchan, Norman
Haseldline, Norman
Morris, Charles R. (Openshaw)


Buchanan, Richard (G'gow, Sp'burn)
Hattersley, Roy
Morris, John (Aberavon)


Butler, Herbert (Hackney, C.)
Hazell, Bert
Moyle, Roland


Butler, Mrs. Joyce (Wood Green)
Healey, Rt. Hn. Denis
Mulley, Rt. Hn. Frederick


Callaghan, Rt. Hn. James
Henig, Stanley
Murray, Albert


Cant, R. B.
Herbison, Rt. Hn. Margaret
Neal, Harold


Carmichael, Neil
Hilton, W. S.
Noel-Baker, Rt. Hn. Philip (Derby, S.)


Carter-Jones, Lewis
Hobden, Dernnis (Brighton, K'town)
Norwood, Christopher


Castle, Rt. Hn. Barbara
Hooley, Frank
Oakes, Gordon


Chapman, Donald
Horner, John
Ogden, Eric


Coe, Denis
Houghton, Rt. Hn. Douglas
O'Malley, Brian


Coleman, Donald
Howarth, Harry (Wellingborough)
Oswald, Thomas


Concannon, J. D.
Howarth, Robert (Bolton, E.)
Owen, Dr. David (Plymouth, S'tn)


Conlan, Bernard
Howell, Denis (Small Heath)
Owen, Will (Morpeth)


Corbet, Mrs. Freda
Howie, W.
Padley, Walter


Craddock, George (Bradford, S.)
Hoy, James
Page, Derek (King's Lynn)


Crawshaw, Richard
Hughes, Rt. Hn. Cledwyn (Anglesey)
Palmer, Arthur


Cronin, John
Hughes, Hector (Aberdeen, N.)
Pannell, Rt. Hn. Charles


Crosland, Rt. Hn. Anthony
Hughes, Roy (Newport)
Park, Trevor


Crossman, Rt. Hn. Richard
Hunter, Adam
Parkin, Ben (Paddington, N.)


Cullen, Mrs. Alice
Hynd, John
Parkyn, Brian (Bedford)


Dalyell, Tam
Irvine, A. J. (Edge Hill)



Davidson, Arthur (Accrington)
Janner, Sir Barnett
Pavitt, Laurence




Pearson, Arthur (Pontypridd)


Davies, Dr. Ernest (Stretford)
Jay, Rt. Hn. Douglas
Peart, Rt. Hn. Fred


Davies, G. Elfed (Rhondda, E.)
Jeger, George (Goole)
Pentland, Norman


Davies, Ednyfed Hudson (Conway)
Jeger, Mrs. Lena (H'b'n&amp;St. P'cras, S.)
Perry, Ernest G. (Battersea, S.)


Davies, Harold (Leek)
Jenkins, Hugh (Putney)
Prentice, Rt. Hn. R. E.


Davies, Ifor (Cower)
Jenkins, Rt. Hn. Roy (Stechford)
Price, Christopher (Perry Barr)


Delargy, Hugh
Johnson, Carol (Lewisham, S.)
Price, Thomas (Westhoughton)


Dell, Edmund
Johnson, James (K'ston-on-Hull, W.)
Price, William (Rugby)


Dempsey, James
Jones, Dan (Burnley)
Probert, Arthur


Dewar, Donald
Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)
Pursey, Cmdr. Harry


Diamond, Rt. Hn. John
Jones, J. Idwal (Wrexham)
Randall, Harry


Dobson, Ray
Kelley, Richard
Rankin, John




Redhead, Edward


Doig, Peter
Kenyon, Clifford
Rees Merlyn


Dunn, James A.
Kerr, Dr. David (W'worth, Central)
Reynolds, G. W.


Dunnett, Jack
Leadbitter, Ted
Rhodes, Geoffrey


Dunwoody, Mrs. Gwyneth (Exeter)
Ledger, Ron
Roberts, Albert (Normanton)


Dunwoody, Dr. John (F'th &amp; C'b's)
Lee, Rt. Hn. Frederick (Newton)
Roberts, Goronwy (Caernarvon)


Eadie, Alex
Lee, Rt. Hn. Jennie (Cannock)
Roberts, Gwilym (Bedfordshire, S.)


Edwards, Rt. Hn. Ness (Caerphilly)
Lever, Harold (Cheetham)
Robertson, John (Paisley)


Edwards, Robert (Bilston)
Lever, L. M. (Ardwick)
Robinson, Rt. Hn. Kenneth (St. P'c'as)


Edwards, William (Merioneth)
Lewis, Ron (Carlisle)
Robinson, W. O. J. (Walth'stow, E.)


Ellis, John
Lipton, Marcus
Rodgers, William (Stockton)


English, Michael
Lomas, Kenneth
Roebuck, Roy







Rogers, George (Kensington, N.)
Stewart, Rt. Hn. Michael
Wells, William (Walsall, N.)


Row, Paul
Strauss, Rt. Hn. G. R.
Whitaker, Ben


Ross, Rt. Hn. William
Summerskill, Hn. Dr. Shirley
White, Mrs. Eirene


Rowland, Christopher (Meriden)
Swain, Thomas
Whitlock, William


Rowlands, E. (Cardiff, N.)
Symonds, J. B.
Wigg, Rt. Hn. George


Ryan, John
Taverne, Dick
Wilkins, W. A.


Shaw, Arnold (Ilford, S.)
Thomas, George (Cardiff, W.)
Willey, Rt. Hn. Frederick


Sheldon, Robert
Thomas, Iorwerth (Rhondda, W.)
Williams, Alan (Swansea, W.)


Shinwell, Rt. Hn. E.
Thornton, Ernest
Williams, Alan Lee (Hornchurch)


Shore, Peter (Stepney)
Tinn, James
Williams, Mrs. Shirley (Hitchin)


Short, Rt. Hn. Edward (N'c'tle-u-Tyne)
Tomney, Frank
Williams, W. T. (Warrington)


Short, Mrs. Renée (W'hampton, N. E.)
Tuck, Raphael
Willis, George (Edinburgh, E.)


Silkin, Rt. Hn. John (Deptford)
Urwin, T. W.
Wilson, Rt. Hn. Harold (Huyton)


Silkin, S. C. (Dulwich)
Varley, Eric G.
Wilson, William (Coventry, S.)


Silverman, Julius (Aston)
Wainwright, Edwin (Dearne Valley)
Winterbottom, R. E.


Skeffington, Arthur
Walker, Harold (Doncaster)
Woof, Robert


Slater, Joseph
Wallace, George
Wyatt, Woodrow


Small, William
Watkins, David (Consett)
Yates, Victor


Snow, Julian
Watkins, Tudor (Brecon &amp; Radnor)



Spriggs, Leslie
Weitzman, David
TELLERS FOR THE AYES:


Steele, Thomas (Dunbartonshire, W.)
Wellbeloved, James
Mr. Grey and Mr. Lawson.




NOES


Alison, Michael (Barkston Ash)
Elliot, Capt. Walter (Carthalton)
Jopling, Michael


Allason, James (Hemel Hemptead)
Errington, Sir Eric
Joseph, Rt. Hn. Sir Keith


Astor, John
Eyre, Reginald
Kaberry, Sir Donald


Atkins, Humphrey (M'tn &amp; M'd'n)
Farr, John
Kerby Capt. Henry


Awdry, Daniel
Fisher, Nigel
Kimball, Marcus


Baker, W. H. K.
Fletcher-Cooke, Charles
King, Evelyn (Dorset, S.)


Barber, Rt. Hn. Anthony
Forrest, George
Kirk, Peter


Batsford, Brian
Fortescue, Tim
Kitson, Timothy


Beamish, Col. Sir Tufton
Foster, Sir John
Knight, Mrs. Jill


Bell, Ronald
Galbraith, Hn. T. G.
Langtord-Holt, Sir John


Bennett, Sir Frederic (Torquay)
Gibson-Watt, David
Legge-Bourke, Sir Harry


Bennett, Dr. Reginald (Gos. &amp; Fhm)
Gilmour, Ian (Norfolk, C.)
Lewis, Kenneth (Rutland)


Berry, Hn. Anthony
Gilmour, Sir John (Fife, E.)
Lloyd, Rt.Hn. Geoffrey (Sut'nC'dfield)


Bessell, Peter
Glover, Sir Douglas
Lloyd, Ian (P'tsm'th, Langstone)


Biffen, John
Glyn, Sir Richard
Lloyd, Rt. Hn. Selwyn (Wirral)


Biggs-Davison, John
Godber, Rt. Hn. J. B.
Longden, Gilbert


Birch, Rt. Hn. Nigel
Goodhart, Philip
Loveys, W. H.


Black, Sir Cyril
Goodhew, Victor
McAdden, Sir Stephen


Blaker, Peter
Gower, Raymond
MacArthur, Ian


Body, Richard
Grant, Anthony
Maclean, Sir Fitzroy


Bossom, Sir Clive
Grant-Ferris, R.
Macleod, Rt. Hn. lain


Boyd-Carpenter, Rt. Hn. John
Gresham Cooke, R.
McMaster, Stanley


Boyle, Rt. Hn. Sir Edward
Grieve, Percy
Macmillan, Maurice (Farnham)


Braine, Bernard
Griffiths, Eldon (Bury St. Edmunds)
Maddan, Martin


Brinton, Sir Tatton
Gurden, Harold
Maginnis, John E.


Bromley-Davenport, Lt. Col. Sir Walter
Hall, John (Wycombe)
Marples, Rt. Hn. Ernest


Brown, Sir Edward (Bath)
Halt-Davis, A. G. F.
Marten, Neil


Bruce-Gardyne, J.
Hamilton, Michael (Salisbury)
Mathew, Robert


Bryan, Paul
Harris, Frederic (Croydon, N. W.)
Maude, Angus


Buchanan-Smith, Alick (Angus, N&amp;M)
Harris, Reader (Heston)
Mawby, Ray


Bullus, Sir Eric
Harrison, Brian (Maldon)
Maxwell-Hyslop, R. J.


Burden, F. A.
Harrison, Col. Sir Harwood (Eye)
Maydon, Lt.-Cmdr. S. L. C.


Campbell, Gordon
Harvey, Sir Arthur Vere
Mills, Peter (Torrington)


Carlisle, Mark
Harvie Anderson, Miss
Mills, Stratton (Belfast, N.)


Carr, Rt. Hn. Robert
Hastings, Stephen
Miscampbell, Norman


Cary, Sir Robert
Hawkins, Paul
Mitchell, David (Basingstoke)


Chichester-Clark, R.
Hay, John
Monro, Hector


Clark, Henry
Heald, Rt. Hn. Sir Lionel
More, Jasper


Clegg, Walter
Heath, Rt. Hn. Edward
Morgan, Geraint (Denbigh)


Cooke, Robert
Heseltine, Michael
Morrison, Charles (Devizes)


Cooper-Key, Sir Neill
Higgine, Terence L.
Mott-Radclyffe, Sir Charles


Cordle, John
Hiley, Joseph
Munro-Lucas-Tooth, Sir Hugh


Corfiled, F. V.
Hill, J. E. B.
Mutton, Oscar


Costain, A. P.
Hirst, Geoffrey
Nabarro, Sir Gerald


Craddock, Sir Beresford (Spelthorne)
Hobson, Rt. Hn. Sir John
Neave, Airey


Crawley, Aidan
Hogg, Rt. Hn. Quintin
Nicholls, Sir Harmar


Crosthwaite-Eyre, Sir Oliver
Holland, Philip
Noble, Rt. Hn. Michael


Crouch, David
Hooson, Emlyn
Nott, John


Crowder, F. P.
Hordern, Peter
Onslow, Cranley


Cunningham, Sir Knox
Hornby, Richard
Orr-Ewing, Sir Ian


Dance, James
Howell, David (Guildford)
Osborn, John (Hallam)


Davidson, James (Aberdeenshire, W.)
Hunt, John
Osborne, Sir Cyril (Louth)


Dean, Paul (Somerset, N.)
Hutchison, Michael Clark
Page, Graham (Crosby)


Deedes, Rt. Hn. W. F. (Ashford)
Iremonger, T. L.
Page, John (Harrow, W.)


Dodds-Parker, Douglas
Irvine, Bryant Godman (Rye)
Pardoe, John


Doughty, Charles
Jenkin, Patrick (Woodford)
Pearson, Sir Frank (Clitheroe)


Douglas-Home, Rt. Hn. Sir Alec
Jennings, J. C. (Burton)
Peel, John


Drayson, G. B.
Johnson Smith, G. (E. Grinstead)
Percival, Ian


du Cann, Rt. Hn. Edward
Johnston, Russell (Inverness)
Peyton, John


Eden, Sir John
Jones, Arthur (Northants, S.)
Pike, Miss Mervyn







Pink, R. Bonner
Sinclair, Sir George
Wainwright, Richard (Colne Valley)


Pounder, Rafton
Smith, John
Walker, Peter (Worcester)


Powell, Rt. Hn. J. Enoch
Stainton, Keith
Walker-Smith, Rt. Hn. Sir Derek


Price, David (Eastleigh)
Steel, David (Roxburgh)
Wall, Patrick


Prior, J. M. L.
Stodart, Anthony
Wetherill, Bernard


Ramsden, Rt. Hn. James
Stoddart-Scott, Col. Sir M. (Ripon)
Webster, David


Rawlinson, Rt. Hn. Sir Peter
Summers, Sir Spencer
Wells, John (Maidstone)


Rees-Davies, W. R.
Talbot, John E,
Whitelaw, William


Renton, Rt. Hn. Sir David
Tapsell, Peter
Wills, Sir Gerald (Bridgwater)


Ridley, Hn. Nicholas
Taylor, Edward M. (G'gow, Cathcart)
Wilson, Geoffrey (Truro)


Ridsdale, Julian
Taylor, Frank (Moss Side)
Winstanley, Dr. M. P.


Rippon, Rt. Hn. Geoffrey
Teeling, Sir William
Wolrige-Gordon, Patrick


Rodgers, Sir John (Sevenoaks)
Temple, John M.
Wood, Rt. Hn. Richard


Roots, William
Thatcher, Mrs. Margaret
Woodnutt, Mark


Rossi, Hugh (Hornsey)
Thorpe, Jeremy
Worsley, Marcus


Royle, Anthony
Tilney, John
Wylie, N. R.


Russell, Sir Ronald
Turton, Rt. Hn. R. H.
Younger, Hn. George


Sandys, Rt. Hn. D.
van Straubenzee, W. R.



Scott, Nicholas
Vaughan-Morgan, Rt. Hn. Sir John
TELLERS FOR THE NOES:


Sharples, Richard
Vickers, Dame Joan
Mr. Pym and Mr. R. W. Elliott.


Shaw, Michael (Sc'b'gh &amp; Whitby)

Resolved,


That the Prices and Incomes Act 1966 (Commencement of Part IV) Order 1966 (S.I. 1966, No. 1262), dated 5th October, 1966, a copy of which was laid before this House on 5th October, be approved.

Orders of the Day — DOUBLE TAXATION RELIEF (DENMARK AND NORWAY)

Motion made and Question proposed,
That an humble Address be presented to Her Majesty, praying that, on the ratification by the Government of Denmark of the Protocol set out in the Schedule to the Order in Council entitled the Double Taxation Relief (Taxes on Income) (Denmark) Order 1966, a draft of which was laid before this House on 28th July, an Order may be made in the form of that draft.—[Mr. MacDermot.]

10.25 p.m.

Mr. Patrick Jenkin: This Order and the similar Order relating to Norway may well be regarded as slightly less contentious than the subject of the debate just concluded. I suggest, Mr. Speaker, that it might be for the convenience of the House if, together with the Denmark Order, we consider the Norway Order covered by the second Prayer:
That an humble Address be presented to Her Majesty, praying that, on the ratification by the Government of Norway of the Protocol set out in the Schedule to the Order in Council entitled the Double Taxation Relief (Taxes on Income) (Norway) Order 1966, a draft of which was laid before this House on 5th August, an Order may be made in the form of that draft.

Mr. Speaker: I have no objection if the Government have no objection.

The Financial Secretary to the Treasury (Mr. Niall MacDermot): The Financial Secretary to the Treasury (Mr. Niall MacDermot) indicated assent.

Mr. Speaker: I must warn the hon. Member that these debates are quite narrow.

Mr. Jenkin: Yes, Mr. Speaker. The Orders are the next two in the long string of Orders which we shall be considering and which the Government are negotiating with overseas Governments as a consequence of the changes in taxation which they introduced last year. When I think of the prospect of about 74 or 75 further Orders which will come before the House during the next year or two I begin to think that we might have some form of automation, with a form of shorthand in which we could put our various points.
I have one or two things to say about the Denmark Order. Where there is a fairly fundamental change in the structure of the double taxation relief it is usual

in these Orders that the change should be reciprocal. But in the Denmark Order, which I believe is the first of this nature which we have encountered, the change is wholly unilateral. It is entirely at the instance, though not necessarily to the benefit, of the United Kingdom Government, because it is tantamount to a unilateral withdrawal of relief for the United Kingdom investor in Denmark. One might well suggest in passing that all these Orders should be described not as double taxation relief Orders, but as double taxation withdrawal of relief Orders, for that would be a more accurate title.
The Order limits relief for the underlying tax, the actual company tax paid in the foreign country—in this case, Denmark—to those British investments in Danish companies which represent more than 25 per cent. of the voting power. For portfolio investments, anyone with less than 25 per cent. now has no relief for underlying tax.
Since in the case of Denmark there is the rather strange procedure that there is no withholding tax deducted by the Danish company when paying dividends to an overseas shareholder, the effect of the Order for portfolio investments—perhaps the Financial Secretary may not have appreciated this—is to withdraw all vestiges of double tax relief on British investments in Denmark. When one bears in mind that company tax in Denmark is substantially higher than Corporation Tax in this country—it is 44 per cent. at present—and then the dividends in this country will be subject, with no relief at all, to the full rigours of United Kingdom Income Tax and Surtax, one sees that there is a very considerable reduction in the value of the investment.
One is bound to add that, if the Danish tax rate goes up, as well it might, then, because of the taxation of the profits in Denmark, with no relief for that taxation, and the subsequent taxation of the dividends in this country, the net return to the United Kingdom investor is very nearly eliminated altogether.
This agreement is unusual, as I have said, in that there appears to be no reciprocity at all. This is a unilateral penalising of all existing United Kingdom portfolio investments in Denmark. Why is there no reciprocity here? Why have the


Government not been able to get a corresponding provision affecting the Danish investor in Britain?
Perhaps the hon. and learned Gentleman will have in mind the brief exchange we had on this point during our proceedings on the Finance Bill earlier this year. On 21st June, on the Question. "That Clause 28 stand part of the Bill"—it is now Section 30 of the Act—I raised the question whether it is right to maintain the distinction between the 25 per cent. test and the 10 per cent. test, the 25 per cent. being general and the 10 per cent. Commonwealth and most treaty relief. The hon. and learned Gentleman replied:
There is a real distinction to be drawn between a relief granted unilaterally and one which is the result of negotiation, with give and take on both sides, where we give up something and get other benefits in exchange. At a time when we are renegotiating agreements—and we have a lot of these negotiations ahead of us—it is not a wise move to lower our sights, as it were, by lowering our unilaterally granted reliefs."—[OFFICIAL REPORT, 21st June, 1966; Vol. 730, c. 521.]
Yet here, in one of the first Orders to come before us, the Government have apparently totally failed to get any corresponding side of the bargain from the other party to the agreement. Why? Why have we no reciprocity?
Second, this Order, unlike some of the others we have had, does not deal at all with the other main point requiring negotiation, namely, the adjustment of the rate of withholding tax. This was fixed in the case of much the most important country in double taxation matters, the United States, at 15 per cent., and 15 per cent. is the figure which has been recommended by the O.E.C.D. model treaty for double tax relief.
The House will remember that in this year's Finance Act there is a tiding-over provision in what is now Section 31(2) which provides temporarily for what came to be known as the mirror image relief, that the Revenue in Britain would be bound to grant a corresponding relief at the same level as the foreign company would be entitled to demand from its State. But in Denmark there is no withholding tax. A Danish company paying dividends to overseas shareholders withholds no tax and, therefore, the position is that a British company under Section 31(2) will not be entitled to withhold any

tax or, if it does under normal Schedule F, the shareholder will be entitled to the whole of that tax back again, I understand.
This is important, because it means that the Danish shareholder in Britain is in a much more favourable position than the British shareholders. For how long must this inequitable situation persist?
I now turn to the Order dealing with Norway. I have one rather different point to make. Here again, the Order does two things. First, it deals with the question of the underlying tax on portfolio investments—and, on this Order, I have no complaint, for it appears to be a reciprocal 10 per cent. This applies in both cases, which appears appropriate bearing in mind the changes in our tax system. But the Order also does what I have never seen done before in such an Order: it deals with the problem of the Continental Shelf in the North Sea between Britain and Norway and makes, it, as it were, part of the territory of Great Britain, in one case and Norway in the other for tax purposes.
I am puzzled as to why this should be done in a double taxation Agreement. It seems a strange thing to do, because the United Kingdom has made it clear to all its licensees, and makes it a condition of their licences to drill for gas or oil, that they become liable to United Kingdom tax—that is to say, that they are United Kingdom residents and taxable as such for all purposes.
Therefore, so far as Britain is concerned—because the Government have a monopoly right of granting licences—the definition which, under this Order, is given to the territory by including the shelf seems to have no purpose at all. I understand that the Norwegians wanted it because they thought they might not have a right to tax somehow because of the use of the words
… a permanent establishment situated in Norway …
in the original double taxation convention. It was thought that this would raise doubts, that they had a right to levy the tax and that it should be made clear.
But it is important to remember that this Order not only grants relief from double taxation, but also has various subsidiary purposes, dealing with tax avoidance, and so on. In no sense can


an Order of this kind give either party any right to exact a tax which does not already exist under its domestic legislation. If the Norwegians wanted to make sure that companies prospecting in the Continental Shelf should become liable to Norwegian tax, the right course for them—and the British Government should have insisted—would have been to pass legislation in their domestic tax law.
What has been done here by including this provision in a double taxation convention could be dangerous, because it could be that some might seek to argue that the Order by itself has brought within the scope of the domestic tax legislation of one or the other country a prospective taxpayer who would not otherwise be there. It is important to make it clear that these treaties should not be regarded as taxing instruments, but that the tax should always stem from the original domestic legislation of the country concerned.
There seems to be a somewhat questionable principle here and I should be grateful for an explanation from the hon. and learned Gentleman.

Mr. R. B. Cant: May I ask the Financial Secretary, when he is replying, to say what effect these Orders will have on the respective balances of payments of Britain, Norway and Denmark? This is likely to be very significant in respect of other Orders which may be initiated.

10.40 p.m.

The Financial Secretary to the Treasury (Mr. Niall MacDermot): To answer the question of my hon. Friend the Member for Stoke-on-Trent, Central (Mr. Cant) first, I cannot give any figures quantifying the effect, but the general effect of both Orders will be to benefit our balance of payments position, because the purpose of them is to give effect to the important provisions following on the introduction of our Corporation Tax system and which require us to amend our double taxation agreements, in particular, to amend any provisions in an agreement requiring us to give portfolio investors in an overseas company credit in respect of their dividends for underlying overseas tax. Secondly, it is necessary to amend any provision in an agreement which no longer satisfactorily

provides for the regulation of the tax on dividends flowing from one country to another.
To deal with the first Order, the Denmark Agreement, the hon. Gentleman the Member for Wanstead and Woodford (Mr. Patrick Jenkin), suggested that in it we were conceding things and that there was nothing of a reciprocal nature in it. Strictly, that is not quite correct.
The Agreement does two things. Dealing with the treatment of dividends, the hon. Gentleman asked why this was not provided for in the Agreement, and the answer is that until we are able to renegotiate these Agreements in full, what we have been doing is to concentrate, in the first instance, upon obtaining immediate agreement dealing with the withdrawal of relief of underlying overseas tax. This has been the case in respect of a number of these agreements laid before the House.
As far as the treatment of dividends is concerned, this will be governed, for the time being, by the transitional provisions in this year's Finance Act. These leave them to be dealt with under what is known as "the mirror image provisions", to which the hon. Gentleman has referred, namely, that we will not levy tax on dividends following from this country to a higher extent than the maximum which may be levied by the other country on dividends flowing to this country. In the case of Denmark it is quite correct that, in practice, the Danes do not at present, levy any tax on dividends flowing from Denmark, but they are entitled to levy tax up to 5 per cent. That is the maximum. It is in that way that the 5 per cent. figure is reached in the case of portfolio investment.
Where the recipient is a company controlling not less than 50 per cent. of the voting power in the paying company, then the tax which may be levied is nil. When we turn to the other side of the matter, the withdrawal of the relief for underlying tax, this protocol to the Convention with Denmark withdraws relief completely for underlying tax for portfolio investors in respect of dividends paid after it has entered into force.
With regard to direct investments, under our general law we give relief unilaterally. The question is then a matter for agreement about what the test shall be for this purpose of direct investments.


In the absence of any other agreement, it is 25 per cent. generally and 10 per cent. for Commonwealth countries. This agreement with Denmark—and in this respect it is reciprocal—limits the relief to cases where there is 25 per cent. control of companies, because Denmark also adopts a 25 per cent. control test.
The hon. Member for Wanstead and Woodford said that the Norwegian Agreement was the first he had seen which dealt with the Continental Shelf question. If he refreshes his memory by looking at the New Zealand Agreement, he will see that it contained similar provisions. It has, I think, become the practice for some countries to raise this matter in their agreement. This was done in the present Agreement at the request of Norway, because the Norwegians had fears that without a provision of this kind in the Agreement they might be in difficulties.
The general effect of the provision is to extend the definition, respectively, of the United Kingdom and Norway so as to embrace each country's respective share of the Continental Shelf. The intention is to make it clear that each country should have the right to tax the profits from activities conducted on its part of the Continental Shelf. There is no question of either country seeking to impose a charge which does not exist apart from the Agreement. That is certainly not our intention, nor, we understand, is it the Norwegian intention.
The Norwegian fears arose, I think, in this way. The Convention with Norway provides that industrial or commercial properties of a United Kingdom enterprise are not to be subject to Norwegian tax unless the enterprise is carried on in a trade or business in Norway through a permanent establishment situated in Norway. There is a corresponding agreement governing the liability of Norwegian enterprises to United Kingdom tax.
The Norwegians feared that it might be argued, not owing to any weakness or defect in their domestic law but owing to the wording of the main Agreement, that, say, an offshore oil rig operating in the Norwegian part of the Continental Shelf was not a permanent establishment situated in Norway for the purpose of the double taxation Agreement.
The effect of this alteration in the definition would provide an answer to

any such argument and would ensure, therefore, as is the common intention, that in such a case the Norwegians would have the right to tax the profits resulting from such an activity. That was why it was included. It was done at the request of Norway and it is done in this Agreement, first, because that is a convenient way to do it and, secondly, because the problem with which it is intended to deal itself arises from a double taxation Agreement.

Mr. Patrick Jenkin: Can the Financial Secretary, therefore, confirm that the Order will give no right to the United Kingdom to tax, say, not the licensee, but a company hired by the licensee which was engaged in drilling for oil or natural gas within the British part of the Continental Shelf? The licensee, I understand, under his licence has to be a United Kingdom registered company, a United Kingdom resident company, and, therefore, is automatically liable to United Kingdom tax. The company which it hires to drill the holes does not have to be.
I would be grateful for a categorical assurance that the drilling company which does the work would not become liable to United Kingdom tax by virtue of this Order if it were not liable apart from the Order.

Mr. MacDermot: I always hesitate to give categorical assurances on any tax matter unless I am absolutely certain. If I understand aright the question which has been put to me, although I am not clear that I do, my immediate reaction is that the answer does not depend on where the company is resident, but where the activities are carried on. If the activities are carried on in the United Kingdom part of the Continental Shelf, as I understand it, the effect of these provisions is that they are subject to United Kingdom tax, and vice versa.

Mr. Patrick Jenkin: I must follow this up, because I thought that that was what the Financial Secretary said earlier was not the case. He said that it was not the intention that this should be used to extend the ambit of taxation beyond what our domestic taxation already provided.

Mr. Deputy Speaker (Mr. Sydney Irving): Order. Is the hon. Gentleman making an intervention? He is unable to make another speech.

Mr. Patrick Jenkin: I am aware that I must not make a speech, Mr. Deputy Speaker. I am endeavouring to make an intervention. If a company were not liable to tax under our existing laws, what I am concerned to see is that it should not become liable to tax by virtue merely of this Treaty. If we want to change the law, we should change our own domestic legislation, and not do these things by treaties.

Mr. MacDermot: Perhaps there is no difference between us. I adhere to what I said. This does not impose any new liability to tax under our domestic law. However, the position at the moment is that any person carrying on such activities within our share of the Continental Shelf is already, under our domestic law, liable to tax here. I confirm that this double taxation agreement will not impose a liability to tax here in the United Kingdom which does not already exist.

Question put and agreed to.

Resolved,
That an humble Address be presented to Her Majesty, praying that, on the ratification by the Government of Denmark of the Protocol set out in the Schedule to the Order in Council entitled the Double Taxation Relief (Taxes on Income) (Denmark) Order 1966, a draft of which was laid before this House on 28th July, an Order may be made in the form of that draft.

To be presented by Privy Councillors or Members of Her Majesty's Household.

DOUBLE TAXATION RELIEF (NORWAY)

Resolved,
That an humble Address be presented to Her Majesty, praying that, on the ratification by the Government of Norway of the Protocol set out in the Schedule to the Order in Council entitled the Double Taxation Relief (Taxes on Income) (Norway) Order 1966, a draft of which was laid before this House on 5th August, an Order may be made in the form of that draft.—[Mr. MacDermot.]

To be presented by Privy Councillors or Members of Her Majesty's Household.

EMPLOYMENT AGENCIES (REGULATION) [MONEY]

Resolution reported,
That, for the purposes of any Act of the present Session to regulate fee-charging employment agencies, it is expedient to authorise—

(a) the payment out of moneys provided by Parliament of any administrative expenses incurred by the Minister of Labour in consequence of that Act, including expenses attributable to proceedings under that Act;
(b) the payment into the Exchequer of fees received by him in pursuance thereof.

Resolution agreed to.

HOUSING (FINANCIAL PROVISIONS, &c.) (SCOTLAND) BILL

Order for Second Reading read.

Bill referred to the Scottish Grand Committee.—[Mr. Willis.]

Orders of the Day — SCOTLAND (HELL AND UPLAND FARMERS)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Bishop.]

10.53 p.m.

Mr. Hector Monro: If the Government had listened to or acted upon the speeches by hon. Members on both sides of the House during the past 18 months, expressing grave concern over the problems of hill and upland farmers, this debate would not have been necessary. The number of hon. Members who are showing a keen interest in this debate indicates how important we all feel it is, and I wish that time allowed them to join in and make constituency points.
The crisis which I am about to relate is due entirely to the stubborn refusal of the Government to listen to warnings and take action. Instead, they maintain an infuriating complacency. The Minister of Agriculture, Fisheries and Food, writing to my right hon. Friend the Member for Grantham (Mr. Godber) on 12th September, said that he was not unduly alarmed. How out of touch can one get?
Hon. Members brought this developing crisis to the notice of the Government last year, at the election in March and during the Second Reading of the Agriculture Bill in May, when I called for a crash programme for the hills.
In the debate on 6th July, when my hon. Friend the Member for Edinburgh, West (Mr. Stodart) moved a Motion deploring the failure of the Government's


hill sheep policy, I said in my opening remarks:
What I found so extraordinary in the speech of the Minister of State was that there was no recognition of the fact that the plight in the hills is serious and that if much more drastic action is not taken on behalf of the hill fanners many of them will go to the wall and go out of business".
I concluded my speech by saying:
I implore the Minister"—
and I am glad that he is here to listen again to what I said—
to take immediate action to help this most important branch of farming, particularly in Scotland, where, if the autumn store sales do not show a very considerable improvement in prices, many hill farmers will be bankrupt by next winter."—[OFFICIAL REPORT, 6th July, 1966; Vol. 731, c. 622–24.]
I think that, unfortunately, that may prove to be true. The Government therefore had no lack of warning, but they have not taken any remedial action.
I emphasise that I am speaking tonight about stock rearing, but the Minister must not think that the position of other branches of farming is satisfactory. All branches of the industry—from dairying to grain and potatoes—are suffering severely, and not only in Scotland. Hon. Members are equally concerned about the position in Cumberland, in Northumberland and Westmorland.
The Government must remember, too, that the store market on which the hill farmer depends for his main income is, in turn, lifted or lowered by the fortunes of the purchasing power of the feeding farmer on the arable lowlands, and there is, therefore, a direct connection between the prices of such commodities as barley and potatoes and hill sheep farming interests.
Throughout the Recess all of us, except perhaps the Minister, have received first-hand evidence of the alarming fall in the prices of store sheep and cattle. I shall not go into great detail, but the enormity of the drop must be brought home to the Government. I have figures covering tens of thousands of lambs and ewes of all classes for most of the auction marts in Scotland, and this debate has invoked a large correspondence from the farmers.
I shall not exaggerate the figures, nor will time allow me to give them all. Hill lambs and draft ewes have dropped on average—and it is difficult to strike a

mean—of about £1. Gimmers—and the Minister perhaps knows that they are the foundation breeding stock—have dropped by between £2 and £3, sometimes more. Smaller blackfaces have fared even worse, and heavier sheep like North Country Cheviots are down by £2. One large, well-managed farm in the North, selling thousands of lambs, was down 22s. a head for these lambs, and no less than 54s. 9d. down for his draft ewes, from 108s. 6d. to 53s. 9d. Another mart selling 18,000 ewe lambs was down no less than 39s. 5d.
My figures also show that 15,000 wedder lambs were down 22s., and 10,000 draft halfbreeds were 40s. down. That is a large number, and a fair average, and the Minister must accept that they are typical of the serious problem in Scotland at the moment.
All these prices are substantially below the prices ruling 10 years ago, despite the enormous rise in costs. The drop for lambs is fully 40 per cent. and in draft ewes 50 per cent. over this period.
I think that the position was fairly summed up by Mr. Morgan Milne, Convener of the Livestock Committee of the Scottish N.F.U., when he said last week:
There has been an intolerable reduction in the sheep industry's income".
I am sure there is hardly a farm without a very much reduced wool cheque this season. There has been, I know, a serious fall in lambing percentages due to the bad weather. This is not the Minister's fault, but it is his fault that he will not recognise the facts. The farms and marts which I have sampled come from all over Scotland—Hawick, Reston, Annan, Wester Ross, Argyll, Inverness, Granton, Perth, Stirling, Angus, and so on.
The position at Lairg was quite devastating with a 48 per cent. drop in lamb prices and a 47 per cent. drop in draft ewes. At Rogart, there was a 53 per cent. drop in turnover on ewes and a 28s. 8d. drop on the second sale for lambs. At Dingwall, there was a 50 per cent. drop in turnover in lamb sales. This includes, I know, the drop in total numbers, but it shows a very serious position indeed.
The Minister must recognise that the ewes form a substantial part of the hill farmer's capital and that all farmers have


suffered this heavy capital loss this season. For instance, on 1,000 ewes and their lambs, which is not an unusual quantity for a hill farm, taking into account the drop in the gimmers, the hoggs and the tups, the loss could well be about £5,000. This is very important in relation to farmers who may be forced out of business, because their valuations will be affected under the Hill Farming Act through the drop in prices.
I am a dairy farmer, so that I am not putting forward a case for my own financial improvidence at the moment, but I am speaking on behalf of the hill farmers and upland farmers of Scotland generally—and there are many hill farmers here tonight. Hill farmers know that there will be an occasional poor lambing, as lowland farmers accept barley shake. Although shake has provided a disastrous loss this year of £4 million in Scotland—a figure produced by the National Farmers' Union of Scotland. This can be overcome if the agricultural economy is buoyant and confident enough to look after a temporary setback. But in the present conditions created by the Government this situation has been one of acceleration from despair into disaster, and it has been extremely rapid. Confidence and morale have seldom, if ever, been worse than they are at the moment.
The effect on hill sheep is bad enough, but look at the suckled calf situation. I expect that the Minister knows that in recent years the cattle enterprises have been carrying the losses on the sheep enterprises. When I talk of suckled calves I mean the genuine hill calf which has never seen good land and which needs a long period of better keep for fattening. These typical hill calves have suffered a drop of from £10 to £15 this autumn, and with heifer calves it has often been £20—that is, if a buyer could be found at all. It is a tragic situation. Yet they must be sold because they cannot be wintered at home. I have heard of farmers losing up to £1,000 or more on their calves this autumn compared with last year. Coupled with the catastrophic fall in lamb prices, this means that incomes have been very nearly halved.
So grim is it in Inverness, in particular—and I am glad to see the hon. Member for Inverness (Mr. Russell

Johnston) here—and in Wester Ross that small farmers—often a crofting club—have been brought down to an income of about £4 a week. I have seen the accounts of a well-managed and well-costed farm in Wester Ross where there is only £181 left to live on until next autumn. This is a destitution rate. There is nothing else to turn to and no reserve resources, and there are hoggs to winter—and hogg wintering has gone up to £2 10s. this year. There is no income until next August, which means "10 months hard".
Today, there has been a meeting of the Inverness area of the National Farmers' Union of Scotland. Tonight, I had the opportunity of talking on the telephone to the chairman and the secretary. I was told that the farmers are "nothing else but damned angry" and that many are going bankrupt this winter.
Why has this happened? For far too long the hill an upland farmer and the feeder has had too little profit, if any at all. The guarantee for mutton and wool has remained outrageously low. I am certain that there will be an outcry at the meeting of the Wool Board in Edinburgh this week. Since 1954, the price of wool has dropped 9 per cent. to the producer while the costs have risen by no less than 68 per cent. Bank Rate at the moment is murder. Credit is hard to obtain and nobody can afford it. We want to modernise out of profit not on credit, but the profits just are not there.
I am not pressing the Government specifically on credit, as that is only part of the malaise. Had the Minister of Agriculture, Fisheries and Food made his Harper Adams speech in July rather than late in September, it might have been of some use, although it was significant that the biggest weekly drop in the price of ewe lambs occurred the week following the right hon. Gentleman's announcement. It was a speech full of small print and escape clauses and can be summed up by saying that the road to hell is indeed paved with good intentions.
Credit is more serious for the merchants and machinery suppliers, who are pressing the farmers. I pay tribute to the bank managers, who have been doing their best in difficult circumstances, without any instructions from the Government and with no release of special deposits. There is still no sign of the farm


improvement grant and no money for the Scottish Agricultural Securities Corporation. The Agriculture Bill drags on in Committee. The Government can get their prices and incomes legislation through in two weeks, but it may take two years to get the Agriculture Bill through, mainly because the Minister will not give the Committee which is considering it fair answers and information.
It is impossible to sell a farm because nobody can get the credit to buy it, not even sufficient money to reorganise to become more efficient. I need not more than mention the infamous S.E.T. loan which, the Minister will have noted from a Parliamentary Answer, has already taken £1¼ million out of agriculture since September. Nor need I mention the rise in transport charges due to the increased fuel tax.
On top of all that, the final straw is the Irish Trade Agreement. We appreciate the difficulties of Eire, but we must think of Scotland first. Under that Agreement we must accept 25,000 tons of beef and 9,000 tons of mutton in a full year and make deficiency payments to the Eire Government. In October, the Eire Government paid their exporters—not farmers—£4 10s., now rising to £5, for every bullock and store beast sent to Britain. Cattle have come flooding into this country and they cannot send them to the Common Market because of the tariff wall, which is now £3 4s. per live cwt.
Beef prices have slumped. In some markets last week the price was 120s. and some beasts were unsaleable. The guarantee is 184s., but with the deficiency payment at 25s., farmers are being completely ruined by the Government. The importation of Irish cattle has made complete nonsense of the Abatement Scheme, which was introduced to encourage orderly marketing, and now the abatement rate is 7s. 3d. per live cwt. The result of this action has been to knock the beef trade for six and this has had repercussions on store and suckled calf sales.
What action should the Government take in the short-term, for I am not tonight speaking of the long-term; about entering the Common Market, and so on? We want action at once for a special hill ewe subsidy. If the Minister of

Agriculture, Fisheries and Food could give forward information about pigs, as he did last month, he should certainly be able to do so for sheep now. We cannot wait until the Price Review which, of course, means waiting for payments until about this time next year. I remind the Minister that the Joint Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food, the hon. Member for Edinburgh, Leith (Mr. Hoy), said in a debate in May, 1965, that if a disaster should occur in the future, he was sure that the Government would take special measures to meet it. Is this another promise that the Government have forgotten?
I give the Minister of State seven points on which to take immediate action. First, there should be a special interim hill ewe subsidy of £1—it should be £2 by next spring—which is the only way of immediately injecting money into the hill industry. Second, there should be a special subsidy for ewes on winter keep farms but which are not receiving the hill ewe subsidy; those on the eastern borders and up the east coast. A payment of 15s. per ewe would be welcomed now. We should, too, in view of the incredibly bad season, be prepared to consider a special subsidy for low-ground ewes in Scotland. Fourth, there should be a retrospective increase of 3d. on the price of wool to reimburse people for the losses they have had in wool this year.
Fifth, we should have an increase in the guaranteed price of mutton to help the feeders and to restore confidence. The Minister will be aware that we have lost the 2d. premium we used to have in Scotland. I would remind him that in paragraph 27 of the Price Review this year we read:
The scale of abatements and supplements under the graduated deficiency payments scheme will be adjusted in the light of expected market conditions".
What is he doing about that?
Sixth, we should have the extra head-age payment of £5, as in England, on hill and winter-keep cattle. The new beef cow subsidy has nothing to do with tonight's problem, and will not help it. We want, too, to retain the winter keep acreage payments, which are so valuable in Scotland. Seven, there must be urgent renegotiation of the Irish Agreement, with a Government promise to prevent


these imports as soon as possible. All this will cost a lot of money, but is it not well worth it to save hill and upland farming in Scotland? It is no use the Government offering money to the Highlands and letting the agricultural economy go to ruin.
Finally, I recall the Prime Minister saying a year ago:
We shall not solve our economic problems without a vigorous import substitution policy through agricultural expansion".
What a charade that has been.
When the Minister replies, I do not want to hear all about long-term prospects—integrating forestry, rural industries, university inquiries and commissions, and this and that—this is an urgent matter—although I would be interested to know what advice has been given by the Hill Farming Advisory Committee, set up recently. We want to know what immediate action the Government intend to take to rescue hill and upland farming from the economic crisis imposed by the Socialists. It is absolute madness to bankrupt a sheep industry prepared to play a part in the balance-of-payments struggle, so let us have from the Minister a straight answer tonight to the question: are we to have help this year or not?

Several Hon. Members: rose—

Mr. Deputy Speaker (Mr. Sydney Irving): Mr. Willis.

Mr. William Baxter: On a point of order, Mr. Deputy Speaker. If an hon. Member does not rise, is it customary to call him?

Mr. Deputy Speaker: I must give the hon. Member the benefit of the doubt. I thought that he was rising.

Mr. Baxter: My eyes must have deceived me.

11.13 p.m.

The Minister of State, Scottish Office (Mr. George Willis): I congratulate the hon. Member for Dumfries (Mr. Monro) on having secured the Adjournment debate and on raising this question because, clearly, it is a matter of concern to both sides of the House. [HON. MEMBERS: "Hear, hear."] This is very understandable when one considers how important farming is to Scotland's economy. I make no apology for reminding the House

that not only is the Scottish hill farm by far the major part of the British hill farming industry, but problems affecting hill farmers tend to be felt earlier and more acutely in Scotland than elsewhere in the United Kingdom because of the altitude, latitude and remoteness.
This Government, from their very earliest days in office, have shown an appreciation of the needs of the hill farmers. [HON. MEMBERS: "Oh."] At our first Annual Price Review, in 1965, we increased the hill cattle subsidy and added 2s. per ewe to the winter-keep grant. We also put the hill sheep subsidy on a better and more secure basis at a rate nearly double that of the average of the preceding five years of Tory rule. I think that we should remember these things.

Mr. Michael Noble: Will the Minister allow me to remind him that this was done on a suggestion perhaps not entirely related to a year when the subsidy was considerably below the subsidy in 1964, which was a less bad year than this?

Mr. Willis: I have noticed that since the right hon. Gentleman has been in opposition he has developed a kind of mythology of his own about what the former Government did. I have not time tonight to destroy the myth he has created.
In our White Paper "The Development of Agriculture", in August, 1965, we foreshadowed measures now embodied in the Agriculture Bill to give continued assistance to hill farmers. I refer to the putting on a permanent basis the hill cattle and hill sheep schemes, the continuation of the winter keep scheme, and the proposed new hill land improvement scheme. All these are important to our hill farmers and I hope that hon. Members opposite will remember this in Committee. We shall be delighted to get the Bill as speedily as possible.

Mr. Anthony Stodart: If the hon. Member is anxious to get it as quickly as possible, will he encourage his hon. Friends to take a little more interest in answering the debates?

Mr. Willis: I have my own views about how the debates are answered and the performance of the Opposition and


the garrulity of some hon. Members. The hon. Member for Edinburgh, West (Mr. Stodart) burns a considerable amount of midnight oil thinking up suitable phrases with which to entertain us.
This year has shown that hill farmers are particularly vulnerable to adverse weather and other forces outwith their control. It is too early to fully assess the results of this year, since a lot of the information is not yet available. Work is continuing, but much more data has to be collected. I listened to the figures which the hon. Member gave and I would like to give some of our figures.
The hon. Member has something to say about lambing: the 4th June count showed a decrease of about 4½ per cent.

Mr. Noble: Does the Minister not know that in June not one farmer knows what the lambing position is? Is he totally ignorant of the facts of life?

Mr. Willis: I am not as ignorant as the right hon. Gentleman thinks. If he wants a reply to this debate he had better not interrupt so much.
I was going on to say that we are, however, aware that these returns may be inaccurate. The surviving ewes and lambs position cannot be accurately assessed until the present season is over and accurate figures cannot be quoted until the December figures are available. The number of ewes coming into the market has fallen because with the better weather farmers hold on to their stock in the hope of prices improving. Sales of ewes and lambs show no substantial drop, although one would expect this is a year of high ewe losses. Our provisional estimate is that ewe losses have been higher than usual but not abnormally high and lamb numbers are down by about 5 per cent.
The hill cattle herd has continued to expand, the 4th June figures being 6 per cent. up on 1965. Marketings of weaned calves since August are between 5 and 10 per cent. higher than last year. Winter during the past year started earlier and continued well into the spring. [Laughter.] According to the Scottish N.F.U., this is unusual. This is part of the case, I understand—that this inflated the feeding bill on hill farms. This is part of the case put to us and I accept it as true. I do not see anything funny about it. I thought it a serious matter; certainly

farmers have given me to understand that it is a serious matter, but hon. Members opposite seem to think there is something humorous about it.
The condition of lambs, particularly at early sales, was below normal. Rather better weather in late August and September led to an improvement in marketings. Lamb prices at the early sales were down by 10 per cent. on last year, but recent sales have shown an increase. Cast ewe prices have been lower.
Calf prices have been on average about £5, or 13 per cent., down. [An HON. MEMBER: "No."] These are the figures. I did not question the figures given by the hon. Member for Dumfries, but I am now giving the figures which we have. Hon. Members usually like to have these figures.

Mr. Paul Hawkins: The Minister may be interested to learn that I have been selling cattle in my auction mart at a drop of £15 per head since April.

Mr. Willis: I did not know that Norfolk was in Scotland. We are discussing Scottish hill farming.
Buyers of all classes of stock have been ready to pay for good quality animals in strong condition, but poorer types and those requiring a longer keep have been at a very marked discount. Profit margins for feeders of sheep and cattle have been low for a number of years. And despite the increase in the guaranteed price for beef and mutton they have clearly made up their minds to pay less this year, particularly where the age, type and condition indicated a long finishing period. Other factors have been the level of imports after the shipping strike and the virtual ban since July on exports to Europe.
Clearly, this has not been a good year, particularly for the hill sheep fanner. After discussions with the Scottish N.F.U., we have embarked on a special joint survey to ascertain the out-turn of the 1966 lamb crop——

The Question having been proposed after Ten o'clock and the debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at twenty-three minutes past Eleven o'clock.